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Finance Unit 1 > Everyday Banking > Flashcards

Everyday Banking Flashcards

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1
Q

What do most adults use their current account for?

A 
Everyday banking needs...
Receiving payments
Storing money for a short period of time
Making payments
Accessing cash
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2
Q

Which type of account to young people tend to use for everyday banking? Why?

A

Savings account

Their main requirements are to store money and withdraw cash

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3
Q

At what age can you get a current account?

A

Aged 11 and over.

Some only available from age 18 because they include option to apply for overdraft

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4
Q

Are current accounts fee to use?

A

Some are free as long as the account is in credit.

Others are not due to the extra services that are available with the account

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5
Q

Where are current accounts available?

A

Banks
Building societies
Post office
Some retailers eg M&S Bank, Tesco Bank

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6
Q

Give the different types of current accounts

A 
Standard current account
Packaged accounts
Basic bank accounts
Student accounts
Youth accounts
Joint accounts
Premium accounts
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7
Q

What type of people tend to suit basic bank accounts?

A

Those who wish to avoid borrowing

Eg living on benefits / low income / who haven’t held a current account before

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8
Q

Why can’t customers with a basic bank account get into debt?

A

Type of account doesn’t offer a debit card, overdraft, cheque book

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9
Q

Are basic bank accounts free of charge?

A

Most are free to use.

But people with a history of fraud / bankrupt may need to pay a set up charge and / or monthly service charge

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10
Q

How do people operate basic bank accounts?

Do they usually offer direct debits / standing orders?

A

Cash cards / pre-paid cards.

Yes - for bill paying

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11
Q

When we’re basic bank accounts introduced and why?

A

2004

Part of government plans for financial inclusion - making sure everyone has access to banking services

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12
Q

Why are people without a bank account disadvantaged?

A

Cannot pay by direct debit

  • > unable to use services which require regular electronic payments e.g. Mobile contracts.
  • > pay higher energy costs because they use pre-paid metres rather than direct debit.
  • > can’t pay over phone / online
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13
Q

To whom are youth accounts available?

A

Under 18s

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14
Q

Do youth accounts offer an overdraft? Why/why not?

A

No - must be over 18 to enter a contract to borrow money

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15
Q

Give the services that youth accounts may offer to 16-19year olds

A 
Cash cards
Debit cards
Standing orders
Direct debits
Cheque book
Online banking
Mobile banking
Text alerts
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16
Q

Give the services that youth accounts offer to 11-15 year olds

A

Cash cards

Debit cards

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17
Q

What do standard current accounts offer?

A 
Full range of current account facilities...
Receiving payments
Cash card
Debit card
Standing orders
Overdraft
Cheque book
Online banking
Mobile banking
Text alerts
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18
Q

Are standard current accounts free of charge?

A

Yes unless person uses overdraft / requests services with a charge

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19
Q

What type of people tend to suit standard current accounts?

A

Those who wish to…
• Pay bills by direct debit
• Manage their money in a variety of ways
• Borrow money for short periods of time

20
Q

What percentage of UK current accounts are standard current accounts?

A

67%

21
Q

What are student and graduate accounts?

A

Variations of standard current accounts but tailored to the needs of students in higher education and recent graduates

22
Q

How are student accounts tailored to students needs?

A

Low interest / no interest overdraft facility.

Incentives eg discounts of contents / travel insurance policies.

23
Q

Give some conditions attached to current accounts that pay interest on credit balances

A

Paying in a minimum monthly amount.
Keeping account in credit.
Banking online / by phone.

24
Q

Are current accounts that pay interest on credit balances free to use?

A

Not always

25
Q

What type of people tend to suit current accounts that pay interest on credit balances?

A

Those with a budget that is surplus to their needs

26
Q

What are the disadvantages of current accounts that pay interest on credit balances?

A

If user goes overdrawn, charges may be higher than the interest / reward paid.
Some require a minimum balance to be maintained eg £1000.

(People may find that their surplus earns higher AER in savings accounts that have fewer withdrawal restrictions)

27
Q

What type of people suit using joint accounts?

A

Those who share finances

Eg married couples / civil partnerships / sharing a rented home / similar attitude to managing money

28
Q

Who repays the amount if a joint account becomes overdrawn?

A

All account holders are responsible.

In some circumstances the provider can take money from one person’s account if the account bears their name.

29
Q

What do packaged accounts offer?

A

Offer holders extra benefits for a monthly fee

Eg mobile / travel insurance, car breakdown cover, discounts in shops, media subscriptions

30
Q

What is the account fee for packaged accounts?

A

£2-£20+ per month

31
Q

Why do people use packaged accounts?

A

If they think the price of the benefits they will use are greater than the annual account fee

32
Q

Who are premier accounts aimed at and what do they offer?

A

For wealthy customers

Offer a range of services e.g. Personal banker

33
Q

What is the level of income / funds to save or invest required to have a premier account?

A

Earnings of £75,000 +

34
Q

Define money laundering

A

Describes the ways in which criminals can use accounts to hide the source of their funds and to make payments in support of their activities

35
Q

How do providers try to prevent money laundering?

A

Before anyone can open any new account they must give the provider proof of their identity and address

  • one document cannot be used to prove both
  • must be original documents, not copies
  • passports etc must not be expired ones
36
Q

Give examples of documents that are often accepted by providers as proof of identity / address
(Preventative of money laundering)

A
  • gas, electricity, water, phone bill less than 3 months old
  • council tax bill within the current financial year
  • driving licence
  • passport
  • employers ID card
  • pension / social security book
  • medical card
  • HMRC documentation
37
Q

Who may find it difficult to prove their identity to their provider?

A

People on benefits
Young people
Those who don’t pay bills

38
Q

What can people on benefits / children / non bill payers use to prove their identity?

A

Benefits…
• entitlement letter from Department of Work and Pensions
• letter from HMRC

Young…
• birth/adoption certificate
• confirmation letter from school etc
• UCAS letter

39
Q

How can people monitor their transactions / current accounts?

A

Paper / online statements

ATMs

40
Q

Why would people want to monitor their current account?

A

To ensure they have sufficient money to pay transactions that are due.
Budgeting.
Check mistakes have not been made.

41
Q

How often are bank statements issued?

A

Once a month for current accounts.

Unless very few transactions are made -> less frequently

42
Q

What is Bacs?

A

The central payment system used to process several different types of electronic payment, esp direct credits

43
Q

Is switching between accounts free, both within one provider and between different providers?

A

Yes

44
Q

Is closing a current account free?

A

Yes - although the holder must pay any fees / other ,only that they owe

45
Q

Can you close a current account at any time?

A

Yes

Finance Unit 1 (7 decks)

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