Different Ways To Pay Flashcards
What is Cash?
In the form of notes and coins.
Advantages of Cash?
- Most widely accepted form of exchange
- Makes budgeting easier
- Quick and simple for small purchases
- Convenient
Disadvantages of Cash?
- Can be lost or stolen
- Threat of counterfeit
- Only appropriate for small purchases
- Can’t be used for online transactions
- Time consuming to count
What is a Debit Card?
Plastic card issued by banks and building societies which allows instant electronic payments to be made.
Advantages of Debit Cards?
- 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
Disadvantages of Debit Cards?
- 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
What is Credit Card?
Plastic card issued by banks which allows customers to delay payments for purchases.
Advantages of Credit Cards?
- 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
Disadvantages of Credit Cards?
- 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
What is a Cheque?
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.
Advantages of Cheques?
- 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
Disadvantages of Cheques?
- 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
What is Electronic Transfer?
Payment transferred directly from one bank account to another.
Advantages of Electronic Transfers?
- Almost instantaneous
- Provides a record of payment
- No additional costs incurred
- Easy to make one or more frequent transactions
Disadvantages of Electronic Transfer?
- 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
What is Direct Debit?
A process that allows money to be transferred automatically once a mandate has been established.
Advantages of Direct Debits?
- 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
Disadvantages of Direct Debits?
- 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
What is a Standing Order?
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)
Advantages of Standing Orders?
- 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
Disadvantages of Standing Orders?
- 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
What is a Pre-Paid Card?
Money that is uploaded on a card with transactions then being withdrawn to reduce the balance.
Advantages of Pre-Paid Cards?
- 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
Disadvantages of Pre-Paid Cards?
- No protection if lost
- Sometimes requires an initial fee to purchase or set up the card (Example is oyster travel cards)
What is a Contactless Card?
Type of credit or debit card that allows to make payment without the use of a chip or pin.
Advantages of Contactless Cards?
- Quick and easy to make transactions of small amounts
- Reduces administration time for the processing of payments
- Gaining popularity
- Secure method of making payments
Disadvantages of Contactless Cards?
- Not all stores accept contactless payments
- Only accepted for small transactions
- No security for use of card
What is a Charge Card?
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.
Advantages of Charge Cards?
- 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
Disadvantages of Charge Cards?
- 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
What is a Store Card?
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.
Advantages of Store Cards?
- 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
Disadvantages of Store Cards?
- 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
What is Mobile Banking?
The ability to carry out financial transactions using mobile devices such as phones or tablets.
Advantages of Mobile Banking?
- Convenient as it can be used at anytime and place
- Quick and easy payment method
- Safer than cash
- Easy to track and manage
- Secure
Disadvantages of Mobile Banking?
- 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
What is BACS?
Banker’s Automated Clearing Service is a system that allows transfer of payments directly from one bank account to another.
Advantages of BACS?
- 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
Disadvantages of BACS?
- 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
What is CHAPS?
Clearing House Automated Payment Systems is a system that allows the transfer of payments directly from one bank account to another.
Advantages of CHAPS?
- Same day payments
- Is not limit not he amount that can be transferred in a single transaction
Disadvantages of CHAPS?
- 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
