Exam Practice - A2

Question 1

state 2 types of payment card ( 2 marks )

Answer 1

Debit card and pre - paid card

Question 2

Explain 2 benefits to the consumer of using the clearing house automated payment system (CHAPS ) (4 marks )

Answer 2

1. It can be accessed online/ branch / telephone so it is a convenient method of payment.
2. Fees may be fixed so can be cost - effective method.

Question 3

Discuss the factors an individual should consider when using a debit card as a method of payment ? ( 6 marks )

Answer 3

advantages of using debit cards as a method of payment :
- can be convenient and a quick method of payment.
- can be a secure method of payments with lower risk of theft.
- widely accepted.
- can offer some protection on purchases.
- suitable for online transactions.
- customers know how much they are spending on each transaction and so can control their spending.

disadvantages of using a debit card as a method of payment :
- short time period between transaction and money leaving the bank account.
- may not be accepted for smaller transactions.
- some retailers have a minimum spend or charge for small amounts.
- may lose track and spend more money on foods , clothes.
- may lose track of payment deadlines
- may be more expensive.
may waste time for regular bills such as utilities.
- it could be stolen and used.

Question 4

discuss the factors an individual should consider about whether to sign up for a store card as a method of payment ? ( 6 marks )

Answer 4

advantages of using a store card as a method of payment :
- discounts or vouchers often available when using a store card.
- get access to promotional events such as pre - sales and VIP events.
- could build up loyalty points.
- access to other promotions such as extended warranties.
- build up a good credit rating.
- instant access to goods and pay later.

Disadvantages of using a store card as a method of payment :
- inflexible as you can only use a store card in that particular store.
- often soled by sales assistants not experts.
- higher interest charged if not repaid in full each month.
- they often charge higher interest than an average credit card.