financial institutions

Question 1

banks

Answer 1

a financial institution that offers individuals/businesses a wide range of services to help manage their money:
- cheques
- mortgages
- loans
- overdrafts
- direct debit
- standing order

Question 2

advantages/disadvantages of banks

Answer 2

advantages: wide range of services, convenient locations, interest paid on positive balance
disadvantages: conflict of interest between shareholders and customers (customers want high interest shareholders want low interest as they only get profit on business), interest charged on loans/overdrafts can be high

Question 3

building societies

Answer 3

owned by the members (account holders) and provide financial advice

Question 4

advantages/disadvantages of building societies

Answer 4

advantages: can offer better interest rates + savings for banks, no shareholders as owned by members who are more interested in society than profit
disadvantages: fewer branches lead to poorer access

Question 5

credit unions

Answer 5

financial cooperatives owned and run by their members, often local and none profit

Question 6

advantages/disadvantages of credit unions

Answer 6

advantages: anyone can join, better terms than payday loans, helps those unable to get a bank loan
disadvantages: loans are usually small, saving rates often lower than at banks, only a few have online presence

Question 7

national savings and investments

Answer 7

• state owned saving banks
• money invested in products used to fund government activities
• attracts individual savers to reduce government need to borrow

Question 8

advantages/disadvantages of national savings and investments

Answer 8

advantages: 100% safe as savings and investments are government backed, some of its services can be accessed from high street, some products have tax free elements
disadvantages: poor interest rates, no interest payments on premium bonds, bank savings are now tax free, may win nothing from premium bonds

Question 9

insurance companies

Answer 9

offer policies which compensate customers against personal loss or damage to property

Question 10

advantages/disadvantages of insurance companies

Answer 10

advantages: peace of mind, small premium may result in a big payout
disadvantages: could pay for something you never use, policy excesses may reduce the benefit

Question 11

pension companies

Answer 11

businesses that sell policies to customers allowing them to save into personal pension schemes in preparation for retirement

Question 12

advantages/disadvantages of pension companies

Answer 12

advantages: employers can contribute, tax free
disadvantages: pension benefits subject to tax, may die before retirement

Question 13

pawnbrokers

Answer 13

individuals or businesses that loan money against the value of a persons assets

Question 14

advantages/disadvantages of pawnbrokers

Answer 14

advantages: easier to be accepted than bank loan, flexible terms, instant cash available
disadvantages: short term cost is high risk of losing asset, rates higher than from banks, items not bought back can be sold by pawnbrokers

Question 15

payday loans

Answer 15

businesses that offer short term loans to people requiring cash between paydays

Question 16

advantages/disadvantages of payday loans

Answer 16

advantages: available quickly, often for unexpected costs, can be for a few days, immediate cash
disadvantages: very high interest rate, easy to get into deeper debt, full cost of loan isn’t always visible