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Business Unit 3: Personal Business And Finance > Different Ways To Pay > Flashcards

Different Ways To Pay Flashcards

1
Q

What is Cash?

A

In the form of notes and coins.

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2
Q

Advantages of Cash?

A
  • Most widely accepted form of exchange
  • Makes budgeting easier
  • Quick and simple for small purchases
  • Convenient
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3
Q

Disadvantages of Cash?

A
  • Can be lost or stolen
  • Threat of counterfeit
  • Only appropriate for small purchases
  • Can’t be used for online transactions
  • Time consuming to count
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4
Q

What is a Debit Card?

A

Plastic card issued by banks and building societies which allows instant electronic payments to be made.

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5
Q

Advantages of Debit Cards?

A
  • Widely accepted
  • Secure method of payment with low risk of theft
  • Safer than cash
  • Offers a degree of protection on purchases
  • Use for online transactions
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6
Q

Disadvantages of Debit Cards?

A
  • Potential delay in processing time before money enters a bank account could result in overspending
  • Not accepted or appropriate for small purchases
  • Transaction fee is charged to businesses for use of card
  • Concerns over fraud if bank card is lost, stolen or cloned
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7
Q

What is Credit Card?

A

Plastic card issued by banks which allows customers to delay payments for purchases.

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8
Q

Advantages of Credit Cards?

A
  • Allows a period of credit that is interest free such as one month
  • Loyalty schemes are often offered such as cash back or collect points
  • Offers a degree of protection on purchases
  • Use for online transactions
  • Secure method of payment with low risk of theft
  • Safer than cash
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9
Q

Disadvantages of Credit Cards?

A
  • Expensive high rates of Interest is charged on balances not paid within a period of time such as one month
  • Can encourage the cardholder to overspend which could result the person getting into debt
  • Transaction fee is charged on cash withdrawals
  • A limit will be set on the amount
  • Unexpected fees
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10
Q

What is a Cheque?

A

Paper based form of payment which is given to the bank to make a payment of a specific amount from one bank account to another.

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11
Q

Advantages of Cheques?

A
  • Low risk of payment as the cheque can only be cashed by the named payee
  • Used to make payments of a high value
  • More secure and safer than cash
  • Allows businesses to manage cash flow more efficiently
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12
Q

Disadvantages of Cheques?

A
  • Expensive for the consumer if the bank refuses to clear the cheque (it bounces)
  • Potential delay in writing the cheque and it being cashed can cause the consumer to go overdrawn
  • Viewed as old fashioned
  • Easy for the consumer to make errors when writing the cheque which can cause problems for both the consumer and recipient
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13
Q

What is Electronic Transfer?

A

Payment transferred directly from one bank account to another.

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14
Q

Advantages of Electronic Transfers?

A
  • Almost instantaneous
  • Provides a record of payment
  • No additional costs incurred
  • Easy to make one or more frequent transactions
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15
Q

Disadvantages of Electronic Transfer?

A
  • Risk of loss if the transfer is incorrectly set up such as account details
  • Need to have access to a device that is connected to the internet
  • Can be time consuming to set up with security checks
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16
Q

What is Direct Debit?

A

A process that allows money to be transferred automatically once a mandate has been established.

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17
Q

Advantages of Direct Debits?

A
  • Quick and easy to set up
  • An easy way to make regular payments such as utility bills
  • Amount paid can vary to ensure the payment matches the amount required by the vendor
18
Q

Disadvantages of Direct Debits?

A
  • If the payer makes a mistake and takes too much, it is the payee’s responsibility to claim the money back
  • The payer determines the amount paid each time, making it difficult for the payee to plan and budget
  • Administration time in the setup and management
19
Q

What is a Standing Order?

A

An agreement made with a bank to transfer a fixed sum of money on a set date on a regular basis. (An example is a phone for £30 a month for 24 months)

20
Q

Advantages of Standing Orders?

A
  • The same amount is paid each time making it easier for the payee to plan and budget
  • Easy to set up and to cancel
  • Don’t need to remember to make regular, standard payments
21
Q

Disadvantages of Standing Orders?

A
  • Payments are taken regardless of the payee’s balance which could lead to the unplanned use of an overdraft
  • Payments will continue to be made unless cancelled
22
Q

What is a Pre-Paid Card?

A

Money that is uploaded on a card with transactions then being withdrawn to reduce the balance.

23
Q

Advantages of Pre-Paid Cards?

A
  • Can set a budget in advance to avoid overspending
  • If lost or stolen, the loss is limited to the remaining balance
  • Ideal to use when travelling overseas
  • Ideal for people with poor credit rating or looking to build one
24
Q

Disadvantages of Pre-Paid Cards?

A
  • No protection if lost

- Sometimes requires an initial fee to purchase or set up the card (Example is oyster travel cards)

25
Q

What is a Contactless Card?

A

Type of credit or debit card that allows to make payment without the use of a chip or pin.

26
Q

Advantages of Contactless Cards?

A
  • Quick and easy to make transactions of small amounts
  • Reduces administration time for the processing of payments
  • Gaining popularity
  • Secure method of making payments
27
Q

Disadvantages of Contactless Cards?

A
  • Not all stores accept contactless payments
  • Only accepted for small transactions
  • No security for use of card
28
Q

What is a Charge Card?

A

Plastic card issued by banks which allows customers to delay payments for purchases for a short period of time and must be paid off in full when a statement is issued.

29
Q

Advantages of Charge Cards?

A
  • Reduces risk of running up debts
  • Use for online transactions
  • Allows a short period of credit
  • Avoids the need to carry cash
  • Often offers additional perks
30
Q

Disadvantages of Charge Cards?

A
  • Must be paid in full each month
  • Often an annual fixed fee is applied
  • Expensive fees if full payment is not made on the due date
  • Not widely accepted at all locations and stores
31
Q

What is a Store Card?

A

A credit card issued by a retail outlet so that customers can delay payments for a short period of time and must be paid in full when a statement is issued.

32
Q

Advantages of Store Cards?

A
  • Allows a short period of credit that is interest free such as one month
  • Often offer loyalty schemes, discounts and special promotions or privileges
  • Quick and easy payment method
  • Safer than using cash
33
Q

Disadvantages of Store Cards?

A
  • Only accepted in issuing store or linked associations
  • Interest is paid on outstanding balances
  • Can encourage overspending and result in the consumer getting into debt
34
Q

What is Mobile Banking?

A

The ability to carry out financial transactions using mobile devices such as phones or tablets.

35
Q

Advantages of Mobile Banking?

A
  • Convenient as it can be used at anytime and place
  • Quick and easy payment method
  • Safer than cash
  • Easy to track and manage
  • Secure
36
Q

Disadvantages of Mobile Banking?

A
  • Features are still limited and therefore mobile banking doesn’t offer all of the features that internet banking has
  • Internet connection or data is required
  • Mistakes could lead to payment not going to the right location
37
Q

What is BACS?

A

Banker’s Automated Clearing Service is a system that allows transfer of payments directly from one bank account to another.

38
Q

Advantages of BACS?

A
  • Payment is almost instant, guaranteed within 2 hours
  • Can be assessed in a number of ways including in a branch, over the telephone and online
  • No additional costs
39
Q

Disadvantages of BACS?

A
  • Faster payment is not offered by all banks or branches and therefore customers may have to default to BACs which an take three days to transfer payments
  • £250,000 is the set limit on the amount that can be transferred in any single transaction
40
Q

What is CHAPS?

A

Clearing House Automated Payment Systems is a system that allows the transfer of payments directly from one bank account to another.

41
Q

Advantages of CHAPS?

A
  • Same day payments

- Is not limit not he amount that can be transferred in a single transaction

42
Q

Disadvantages of CHAPS?

A
  • Normally there is a fixed charge of £35 per transaction regardless of the amount transferred
  • Needs to be instructed before 2pm on a working day

Business Unit 3: Personal Business And Finance (10 decks)

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