Different ways to pay advantages and disadvantages

Question 1

Cash advantages

Answer 1

-Most widely accepted from of exchange
-Physical not virtual
-Consumers feel confidence when using
-Makes budgeting easier

Question 2

Cash disadvantages

Answer 2

-Can be lost or stolen
-Threat of counterfeit
-Only really appropriate on purchases up to a certain amount
-Cannot be used online

Question 3

Debit card advantages

Answer 3

-No need to carry cash
-Secure method of payment with low risk of theft
-Widely accepted
-Offers a degree of protection on purchases
-Suitable for online transactions

Question 4

Debit card disadvantages

Answer 4

-Short time lapse between making the transaction and the money being withdrawn from the customers account
-May result in overspending
-Not accepted or appropriate small transactions

Question 5

Credit card advantages

Answer 5

-Allows a period of credit that is interest free e.g. one month
-Most cards are widely accepted
-Loyalty schemes are often offered e.g. collect points or cash back
-Offers a degree of protection on purchases
-Suitable for online translations

Question 6

Credit card disadvantages

Answer 6

-Interest is charged on balances not paid off within a month
-Can encourage a customer to overspend and get into debt
-Interest is charged on cash withdrawals
-A limit will be set on the amount of credit allowed

Question 7

Cheque advantages

Answer 7

-Low risk form of payment as the cheque can only be cashed by the named payee
-Widely accepted for face-to-face and postal translations
-No need to provide change as can be written for an exact amount

Question 8

Cheque disadvantages

Answer 8

-Expensive for the customer if the bank refuses to clear the cheque e.g. it bounces
-The time delay between writing the cheque and it being cashed could cause a consumer to go into overdrawn
-Viewed as old fashioned
-Easy for the consumer to make errors when writing a cheque

Question 9

Electronic transfer advantages

Answer 9

-Almost instantaneous
-Provides a record of payment
-No additional costs incurred
-Easy to use for one-off and more frequent transactions

Question 10

Electronic transfer disadvantage

Answer 10

-Risk of loss if the transfer is incorrectly set up
-Not appropriate for face-to-face transitions
-Need to know exact details for transaction

Question 11

Direct debit advantages

Answer 11

-An easy way to make regular payments e.g utility bills
-Amount paid can vary to ensure the payment matches the amount required by the vendor

Question 12

Direct debit disadvantages

Answer 12

-If the payer makes a mistake and takes too much it is the payees responsibility to claim the money back
-The payer determines the amount paid each time making it difficult for the payee to plan and budget

Question 13

Standing Order advantages

Answer 13

• The same amount is paid each time making it easier for the payee to plan and budget
  -Easy for both to set up and to cancel
  -No need to remember to make regular payments

Question 14

Standing order disadvantage

Answer 14

-Payments are taken regardless of the customers balance which could lead to the unplanned use of an overdraft facility
-Payments will continue to be made unless cancelled

Question 15

Prepaid card advantages

Answer 15

-Can set a budget in advance to avoid overspending
-If lost or stolen the loss is limited to the remaining balance
-An effective way of controlling the amount spent by children and where the money is spent

Question 16

Prepaid card disadvantage

Answer 16

-No protection if lost
-Sometimes requires an initial fee to purchase or set up the card

Question 17

Contactless card advantages

Answer 17

-Gaining in popularity
-Secure method of payment

Question 18

Contactless card disadvantages

Answer 18

-Often only accepted for relatively small transactions
-Still not widely accepted as seen as new technology
-Errors can happen e.g. being charged twice if card happened to touch twice by mistake, therefore you need to check the receipt

Question 19

charge card advantages

Answer 19

-Reduces risk of running into debt
-Allows a short period of credit
-Avoids the need to carry cash
-Often offers additional perks

Question 20

Charge card disadvantages

Answer 20

-Must be paid in full each month
-Often an annual fixed fee is applied

Question 21

Store card advantages

Answer 21

-Allows a short period of credit that is interest free e.g. one month
-Often offer loyalty schemes, discounts and special promotions or privileges

Question 22

Store card disadvantages

Answer 22

-Only accepted in issuing store or links associated
Interest is paid on outstanding balances
-Can encourage overspending and result in the customer getting into debt - particularly if they hold multiple stores

Question 23

Mobile banking advantages

Answer 23

-Convenient as it can be used any time and place
-Secure

Question 24

Mobile banking disadvantages

Answer 24

-Features are still limited, hence mobile banking does not offer all of the functionality of internet banking

Question 25

Bankers Automated Clearing Service (BACs) faster payment advantages

Answer 25

-Faster payments allows almost instant transfers that are guaranteed within 2 hours
-Can be accessed in a branch, over the phone and online
-No additional costs

Question 26

Bankers Automated Clearing Service (BACs) faster payment disadvantages

Answer 26

-Faster payment is not offered by all banks or branches and the customer may therefore have to default to BACS which can take three days to transfer payments
-A limit is set on the amount that can be transferred in a single transitions

Question 27

Clearing House Automated Payment Systems (CHAPS) advantages

Answer 27

-Transfers can be made the same day assuming instructions are received prior to a set time e.g 2pm at barclays
-There is no limit on the amount that can be transferred in a single transaction

Question 28

Clearing House Automated Payment Systems (CHAPS) disadvantage

Answer 28

Normally, there is a fixed charge per transaction regardless of the amount transferred.