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Business BTEC Pearson 2023-2024-2025 > Learning Outcome B > Flashcards

Learning Outcome B Flashcards

1
Q

What is a financial institution?

A

An organisation which deals with the transactions of money.

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2
Q

What is meant by the term interest rates?

A

The cost of borrowing, usually a fixed rate and shown as a percentage.

Amount earn’t for saving.

Amount pay back for using credit.

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3
Q

What is the Bank of England?

A

The UK’s central bank with responsibility for maintaining a healthy level of financial stability for the UK as a whole.

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4
Q

What are advantages of the Bank of England?

A

+ Lend to banks.

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5
Q

What are disadvantages of the Bank of England?

A
  • They can raise the base rate = making it more expensive to take out loans for everyone.
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6
Q

What are Banks?

A

Organisations that handle financial transactions and stores money behalf of its customers.

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7
Q

What are advantages of Banks?

A

+ Offers a wide range of services and types of accounts.
+ Secure place to deposit money.
+ Pay interest on positive balances.

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8
Q

What are disadvantages of Banks?

A
  • Savings are only protected up to a certain amount (£75,000)
  • Owned by shareholders.
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9
Q

What are Building Societies?

A

Organisations that handle financial transactions and store money on behalf of their members.

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10
Q

What are advantages of Building Societies?

A

+ Owned by members which means they can set rates that benefit their customers, not shareholders.
+ Offers a wide range of services and types of accounts.
+ Secure place to deposit money.

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11
Q

What are disadvantages of Building Societies?

A
  • Might not be as driven and as efficient as commercial banks.
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12
Q

What are Credit Unions?

A

Not-for-profit organisations that handle financial transactions and store money on behalf of their members.

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13
Q

What are advantages of Credit Unions?

A

+ Offer additional benefits to the community or a positive cause.

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14
Q

What are disadvantages of Credit Unions?

A
  • Like banks, savings only protected up to £75,000 but don’t have the drive of commercial banks.
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15
Q

What are National Savings and Investments?

A

A government-backed organisation that offers a secure saving option. It offers a range of options including ISAs, premium bonds and gilts and bonds.

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16
Q

What are advantages of National Savings and Investments?

A

+ 100% of savings are protected as it is backed by the government.

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17
Q

What are disadvantages of National Savings and Investments?

A
  • Not easy to access as not on many high streets and usually have to give notice before withdrawing.
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18
Q

What are Insurance Companies?

A

Businesses that protect against the risk of loss in return for a premium.
Profit-making organisations.

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19
Q

What are advantages of Insurance Companies?

A

+ Protect against risk.
+ Different levels of protection can be purchased.

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20
Q

What are disadvantages of Insurance Companies?

A
  • Premium depends on how much of a risk the individual seems to be.
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21
Q

What are Pension Companies?

A

Businesses that sell policies to individuals, either privately or through employers, to allow them to save now to fund retirement in the future. They normally invest the money paid to them in contributions in order to increase its value.

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22
Q

What are advantages of Pension Companies?

A

+ Provides security after retirement.
+ Deducted from pay.

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23
Q

What are disadvantages of Pension Companies?

A
  • Money invested here cannot be released until retirement age.
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24
Q

What are Pawnbrokers?

A

Businesses or individuals who loan money against the security of a personal asset. If the item is not bought back from the pawnbroker within a specified period of time then it will be sold on.

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25
Q

What are advantages of Pawnbrokers?

A

+ Quick way of getting cash in return for an asset for a period of time.

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26
Q

What are disadvantages of Pawnbrokers?

A
  • If cash not paid back, the asset that was secured is lost.
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27
Q

What are Payday Loans?

A

Organisations that offer a short-term source of finance used to bridge the gap between now and next receiving a wage; they are normally only available for relatively small amounts at very high rates.

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28
Q

What are advantages of Payday Loans?

A

+ Quick source of finance for urgent short-term situations.

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29
Q

What are disadvantages of Payday Loans?

A
  • Very high interest rates.
30
Q

What are 5 different ways banks communicate with customers?

A

Branch, Telephone Banking, Postal Banking, Mobile Banking, Online Banking.

31
Q

What are advantages of banking in Branch?

A

+ Face to face allows banks to build relationships and trust.
+ Advice can be given on the spot from professionals.

32
Q

What are disadvantages of banking in Branch?

A
  • Long queues.
  • Restricted opening times.
33
Q

What are advantages of Telephone Banking?

A

+ Convenient as available 24/7.

34
Q

What are disadvantages of Telephone Banking?

A
  • Takes a while to set up and get used to.
  • Can’t withdraw cash.
35
Q

What are advantages of Postal Banking?

A

+ Very traditional and many older customers may prefer this.

36
Q

What are disadvantages of Postal Banking?

A
  • Very slow method compared to others available.
37
Q

What are advantages of Mobile Banking?

A

+ Very convenient (can check balance and carry out transactions on the go).

38
Q

What are disadvantages of Mobile Banking?

A
  • Would need to download apps = higher risk than online due to theft.
39
Q

What are advantages of Online Banking?

A

+ Convenient to check balance and ask for help.

40
Q

What are disadvantages of Online Banking?

A
  • Restricted hours (Some centres may be automated).
41
Q

What does FCA stand for?

A

Financial Conduct Authority.

42
Q

What do the FCA aim to make?

A

They aim to make markets work well - for individuals, for business, large and small, and for the economy as a whole. They regulate the conduct for nearly 60,000 businesses.

43
Q

What is the FCA?

A

An independent public body funded entirely by the firms they regulate, by charging them fees. The FCA are accountable to the Treasury, which is responsible for the UK’s financial system, and to parliament.

44
Q

What does FOS stand for?

A

Financial Ombudsman Service.

45
Q

What is the FOS?

A

It is a free service that settles complaints between consumers and businesses that provide financial services.

46
Q

What do the FOS resolve?

A

They resolve disputes fairly and impartially, and have the power to put things right.

47
Q

What do the FSCS do?

A

If a firm goes out of business and can’t pay a claim, the FSCS can step in to pay compensation.
They are independent and their service is free to use. Customers get to keep all the compensation they’re owed.

48
Q

What is the Consumer Credit Act?

A

It regulates credit card purchases but also gives customers protection when they enter into a loan or hire agreement.
It also gives customers the right to a cooling off period.

49
Q

What are examples of what you would want to know before agreeing to pay for something on credit?

A
  • Early repayment penalty.
  • Interest rates.
  • Maximum amount of credit you have been given.
  • Any additional benefits.
  • Repayment terms.
50
Q

What are the 7 organisations in which you can seek information, guidance and advice on for financial help and advice?

A
  1. Citizens Advice.
  2. Independent Financial Advisor (IFA).
  3. Price Comparison Websites.
  4. Money Advice Service
  5. Debt Counsellors.
  6. Individual Voluntary Arrangements (IVAs) bankruptcy.
  7. Bankruptcy.
51
Q

What is Citizens Advice?

A

An organisation which is run by charities.

It offers advice on a wide range of issues both financial and non-financial.

The advice is offered at physical centres as well as online and via email and telephones.

The financial advice covers areas including, debt, benefits, banking, pensions and insurance.

52
Q

What is an Independent Financial Advisor (IFA)?

A

Professionals who offer independent advice to their clients on financial matters including savings, investments, mortgages and pensions.

53
Q

What are Price Comparison Websites?

A

These websites collate prices for similar goods and service within an industry allowing consumers to make comparisons easily and find the best deals.

54
Q

What is Money Advice Service?

A

This is a government organisation set up to offer free and impartial financial advice in the UK.

55
Q

What are Debt Counsellors?

A

This is a professional who offers independent advice on how best to manage debt.

56
Q

What are Individual Voluntary Arrangements (IVAs) & Bankruptcy?

A

A government organisation that allows an individual to declare themselves bankrupt while agreeing to pay all or part of the money they owe to creditors through an insolvency practitioner.

Regular payments are made to the insolvency practitioner who then spreads this across the creditors deciding how much to pay each one.

57
Q

What are advantages of Citizens Advice?

A

+ Free service.
+ Offers face to face as well as online and telephone advice.
+ Wide range of areas covered.

58
Q

What are disadvantages of Citizens Advice?

A
  • Trained volunteers are not professionals.
  • Knowledge in finance may be limited.
59
Q

What are advantages of an Independent Financial Advisor (IFA)?

A

+ Provides personalised services.
+ Objective & unbiased.
+ Professional advice.

60
Q

What are disadvantages of an Independent Financial Advisor (IFA)?

A
  • Charge fees.
  • Dependant on the quality of the advisor.
61
Q

What are advantages of Price Comparison Websites?

A

+ Access 24/7.
+ Free.
+ Easy to compare.

62
Q

What are disadvantages of Price Comparison Websites?

A
  • Could be biased.
  • Does not always cover all providers.
  • Focus on price not quality.
63
Q

What are advantages of Money Advice Services?

A

+ Free.
+ Unbiased.

64
Q

What are disadvantages of Money Advice Services?

A
  • Advice is only available online or over the phone = no physical presence.
  • Can take time to find and understand the specific advice that is being searched for.
  • Advice can be generic rather than personal.
65
Q

What are advantages of Debt Counsellors?

A

+ Professionals who specialise in debt.
+ Regulated by the FCA and FOS.

66
Q

What are disadvantages of Debt Counsellors?

A
  • It’s not free.
  • Just focuses on debt.
67
Q

What are advantages of Individual Voluntary Arrangements (IVAs)?

A

+ Help manage debts via regular payments.
+ Unbiased advice as independent.
+ Offers legal protection.
+ No expectation to sell assets.
+ All debt at the end at the end of your IVA will be written off.

68
Q

What are disadvantages of Individual Voluntary Arrangements (IVAs)?

A
  • Fees are charged for the service.
  • Impact of credit rating (stays on for 6 years).
  • May have to claim bankruptcy.
69
Q

What are advantages of Bankruptcy?

A

+ Suspends any debt collection.
+ Debts are usually fully written off = fresh start.
+ Don’t have any more contact from creditors you did owe.

70
Q

What are disadvantages of Bankruptcy?

A
  • May get all assets repossessed.
  • Stays on your credit report for 7 to 10 years.
  • Difficult to borrow in the future.
  • Cannot work in the government if claimed bankruptcy.
  • Lose assets.
  • Very difficult to get credit.
  • Cannot borrow over £500 without telling them you are bankrupt.
71
Q

Comparisons between IVA & Bankruptcy:

A

Bankruptcy -
= May have to sell assets (physical & financial).
= Can’t get employment in some sectors.
IVA -
= Not expected to sell assets.
= 75% of creditors must agree to it.
Bankruptcy & IVA -
= No contact from creditors.
= Debt written off (at the end of IVA).
= In England, Wales & Northern Ireland.
= Can’t borrow over £500.
= 6 years on credit file.

72
Q
A

Business BTEC Pearson 2023-2024-2025 (13 decks)

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