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Personal and Business Finance > Learning Outcome B: Explore the personal finance sector > Flashcards

Learning Outcome B: Explore the personal finance sector Flashcards

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1
Q

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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2
Q

What do the responsibilities of the Bank of England include?

A

Issuing legal tender, setting interest rates and controlling the national debt

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3
Q

Banks

A

A bank is an organisation that handles financial transactions and stores money on behalf of its customers

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4
Q

What do the services offered by banks include?

A

Holding deposits, making payments when instructed to do so and supplying crdit

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5
Q

Building societies

A

These are organisations that handle financial transactions and store money on behalf ot heir members

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6
Q

Members, or account holders, of building societies are also what of the building society?

A

Part owners

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7
Q

What do building society members have the right to?

A

Vote and receive information on the running of the society

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8
Q

Unlike banks, building societies do/don’t have shareholders on a stock exchange

A

don’t

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9
Q

Unlike banks, building societies don’t have shareholders on a stock exchange which allows costs to be kept down/increases costs

A

allows costs to be kept down

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10
Q

True/False: Credit unions are for-profit organisations

A

False, they are not-for-profit

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11
Q

Credit unions

A

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

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12
Q

Within credit unions often there is a responsibility or desire to support…

A

a community made up of its members

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13
Q

True/False: Members in a credit union are the owners and have a voting right

A

True

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14
Q

National Savings and Investments

A

A government-backed organisation that offers a secure saving option

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15
Q

National Savings and Investments offer a range of options such as…

A

ISAs, premium bonds and gilts and bonds

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16
Q

Insurance companies

A

Businesses that protect against the risk of loss in return for a premium

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17
Q

True/False: Insurance companies are not-for-profit

A

False, they are profit-making organisations

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18
Q

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

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19
Q

What do pension companies normally do with the money paid to them?

A

Invest it in contributions in order to increase its value

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20
Q

True/False: Investments made by pension companies are risk free

A

False, they are not risk free

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21
Q

Pawnbrokers

A

Businesses or individuals who loan money against the security of a personal asset, e.g. an item of jewellery or piece of electronic equipment

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22
Q

What happens if an item given to a pawnbroker isn’t bought back within a specified period of time?

A

It will be sold on

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23
Q

Payday loans

A

Organisations that offer a short-term source of finance used to bridge the gap between now and next receiving a wage

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24
Q

Payday loans are usually available for relatively large/small amounts at very low/high rates

A

small amounts, high rates

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25
Q

When may payday loans be suitable?

A

In an emergency to meet cash shortages

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26
Q

Give 2 advantages of the Bank of England

A

Any 2 from it’s responsible for protecting the financial stability of the economy as a whole, sets interest rates at a level designed to help achieve a stable economy and lends to banks

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27
Q

Give a disadvantage of the Bank of England

A

Any from not a bank for members of the general public, and can raise interest rates making borrowing more expensive

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28
Q

Give 2 advantages of banks

A

Any 2 from offer a range of services and account types, provide a secure place to store money and pay interest on credit balances on most types of accounts

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29
Q

Give a disadvantage of banks

A

Any from savings are only protected up to the value of £75,000, so if a bank goes bankrupt savings above this would be lost and profit-making organisations owned by shareholders, therefore costs to individuals may be higher than necessary in order to fulfil shareholder objectives

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30
Q

Give 2 advantages of building societies

A

Any 2 from offer a range of services and account types, provide a secure place to store money, pay interest on credit balances on most types of accounts and owned by members and therefore costs can be kept down allowing for higher interest payments

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31
Q

Give a disadvantage of building societies

A

Any from savings are only protected up to the value of £75,000, so if a building society goes bankrupt savings above this would be lost and may lack the business drive of a commercial bank

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32
Q

Give 2 advantages of credit unions

A

Any 2 from offer a range of services and account types, provide a secure place to store money, owned by members and therefore costs can be kept down allowing for higher interest payments and often offer additional benefits to the community or a good cause

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33
Q

Give a disadvantage of credit unions

A

Any from savings are only protected up to the value of £75,000, so if a credit union goes bankrupt savings above this would be lost and may lack the business drive of a commercial bank

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34
Q

Give an advantage of National Savings and Investment

A

Any from government backed (therefore offering security on 100% of savings with no upper limit) and offers additional services/methods of saving e.g. premium bonds

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35
Q

Give 2 disadvantages of National Savings and Investment

A

Any 2 from rates are variable, not easy to access due to lack of a high street presence and often required to give notice on withdrawals

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36
Q

Give 2 advantages of insurance companies

A

Any 2 from protect against unexpected losses or financial expenses, easy and regular monthly payments make planning easy and wide range of services and levels of cover to suit the needs of individuals

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37
Q

Give a disadvantage of insurance companies

A

Any from premiums are assessed on the estimated degree of risk which may be seen to penalise some members or groups of society too harshly and they are profit-making organisations, therefore premiums will be charged to ensure shareholder needs are met

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38
Q

Give 2 advantages of pension companies

A

Any 2 from provides a structure to help pan for financial security after retirement, deductions can e taken directly from pay and be fully or partially matched by an employer’s contribution and experts are employed to make investment decisions

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39
Q

Give a disadvantage of pension companies

A

Any from poor investment decisions by the pension company may result in a disappointing return and money already invested in a pension cannot be released prior to the dates agreed in the policy

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40
Q

Give 2 advantages of pawnbrokers

A

Any 2 from a quick way of acquiring cash needed for a short period of time, the asset can be brought back within a set period of time and interest is not charged

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41
Q

Give a disadvantage of pawnbrokers

A

Any from the amount given for the asset is often substantially lower than its actual worth and if the money is not repaid within the agreed period, the asset will be sold on

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42
Q

Give an advantage of payday loans

A

A quick way of acquiring cash needed for a short period of time

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43
Q

Give a disadvantage of payday loans

A

Any from interest charges are likely to be very high and often results in paying back a final sum substantially higher than the initial amount borrowed

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44
Q

What is meant by branch when discussing a method that banks use to interact with customers?

A

Physical places where the customer will visit to carry out transactions which can be face to face, for example over the counter transactions or using computerised facilities, such as automatic teller machines (ATM)

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45
Q

What additional facilities do branches offer that can’t be offered by mobile banking?

A

Services such as ATMs and advice

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46
Q

Online banking

A

The use of the internet to carry out banking transaction

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47
Q

Telephone banking

A

When transactions are carried out over the telephone

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48
Q

Mobile banking

A

The use of mobile devices such as mobile phones and tablets to conduct financial transactions

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49
Q

Postal banking

A

The use of the postal service to carry out paper-based financial transactions

50
Q

Give 2 advantages of branches as a method of banks communicating with customers

A

Any 2 from opportunity to build a relationship developing trust and brand loyalty, transactions can be conducted there and then, additional services such as advice can be offered and gives the customer a high level of confidence

51
Q

Give 2 disadvantages of branches as a method of banks communicating with customers

A

Any 2 from need to travel to a branch which is likely to incur travel costs, e.g. parking or fares for public transport, restricted to bank opening hours and may be long queues plus travel time, making the process time consuming

52
Q

Give 2 advantages of online banking as a method of banks communicating with customers

A

Any 2 from available 24/7, high degree of privacy and convenient

53
Q

Give 2 disadvantages of online banking as a method of banks communicating with customers

A

Any 2 from takes time at the beginning to set up or apply for, not suitable for cash withdrawals, increased risk due to cyber crime and if just an online account, the facilities may be limited

54
Q

Give an advantage of telephone banking as a method of banks communicating with customers

A

Any from convenient, especially to access basic functions such as checking a balance and no additional charges

55
Q

Give 2 disadvantages of telephone banking as a method of banks communicating with customers

A

Any 2 from full access may be limited to set hours, call centres and automatic telephone systems can frustrate customers and higher risk of fraud and identity theft

56
Q

Give 2 advantages of mobile banking as a method of banks communicating with customers

A

Any 2 from convenient, available 24/7 and no additional charges

57
Q

Give 2 disadvantages of mobile banking as a method of banks communicating with customers

A

Any 2 from may need to download specific apps to access mobile banking for a particular bank, higher security risk due to increased risk of loss or theft of mobile devices and can be prone to hackers sending texts asking for bank details

58
Q

Give an advantage of postal banking as a method of banks communicating with customers

A

Any from traditional method that many customers will feel comfortable with and does not require any additional technology or devices

59
Q

Give a disadvantage of postal banking as a method of banks communicating with customers

A

Any from can be slow due to the postal system and post can get lost

60
Q

True/False: There are laws and organisations responsible for protecting the rights of consumers.

A

True

61
Q

In relation to personal finance, what are laws and organisations responsible for protecting the rights of consumers there to do?

A

Help ensure that the consumer is not treated unfairly or exploited

62
Q

The FCA, FOS, FSCS and OFT are examples of organisations concerned with what?

A

Protecting consumer rights

63
Q

True/False: The FCA is an independent organisation

A

True

64
Q

The FCA is an independent organisation with a remit to do what?

A

Regulate the actions of providers of financial services

65
Q

How is the FCA funded?

A

By membership fees charged to financial service providers

66
Q

What does FCA stand for?

A

Financial Conduct Authority

67
Q

The FCA’s work focuses on how many key areas?

A

3

68
Q

What are the three key areas that the FCA focuses on called?

A

Authorisation, supervision and enforcement

69
Q

What is meant when the FCA say they focus on authorisation?

A

Permitting financial service providers to trade

70
Q

What is meant when the FCA say they focus on supervision?

A

Ensuring procedures and practices are in the interest of the consumer

71
Q

What is meant when the FCA say they focus on enforcement?

A

Using powers to ensure standards are maintained

72
Q

What does FOS stand for?

A

Financial Ombudsmen Service

73
Q

Who is the FOS appointed by?

A

The government

74
Q

What does the FOS represent?

A

The interests of the consumer in disputes with financial service providers

75
Q

What funds the FOS?

A

Compulsory fees charged to all financial institutions plus additional fees when actions are taken against an institution

76
Q

When do the FOS become involved in disputes?

A

Only if they cannot be satisfactorily sorted between the consumer and the financial institution prior to involving the FOS

77
Q

Financial Services Compensation Scheme (FSCS)

A

The organisation in the UK that will pay compensation to a consumer of financial services if the service provider is unable to do so

78
Q

What does FSCS stand for?

A

Financial Services Compensation Scheme

79
Q

The FSCS protects all savers in banks and building societies up to how much?

A

£85,000

80
Q

If a bank or building society goes bankrupt, who will savings be refunded by?

A

The FSCS

81
Q

What does OFC stand for?

A

Office of Fair Traiding

82
Q

True/False: The OFT is an independent organisation

A

False, it is a government organisation

83
Q

What was the OFT established for?

A

To regulate all markets, including financial markets

84
Q

What was the OFT’s aim?

A

To encourage fair practices and healthy competition between financial institutions

85
Q

Since 2014 who has responsibility for financial institutions been passed to?

A

The FCA

86
Q

Since 2014 responsibility for financial institutions has been passed from who to the FCA?

A

The OFT (Office of Fair Trading)

87
Q

Who is consumer credit legislation passed by?

A

The UK government

88
Q

Consumer credit legislation is passed by the UK government to…

A

enforce the regulation of any firm offering credit to consumers

89
Q

Give an example of a firm offering credit

A

Any from leasing, hire purchase agreements, credit cards, etc.

90
Q

Any firm offering credit must be registered with who under consumer credit legislation?

A

The FCA

91
Q

Name 3 organisations or laws concerned with protecting consumer rights

A

Any 3 from the FCA, FOS, FSCS, OFT and legislation: consumer credit

92
Q

Name 3 organisations which offer guidance and advice to individuals on personal finance

A

Any 3 from Citizens Advice, IFAs, price comparison websites, Money advice service UK, debt counsellors and IVAs bankrupty

93
Q

True/False: All organisations which offer guidance and advice to individuals on personal finance are independent

A

False, there are a number of government-funded and independent organisations

94
Q

Who is Citizens Advice run by?

A

Charities

95
Q

What does Citizens Advice offer?

A

Advice on a wide range of issues both financial and non-financial

96
Q

Advice from Citizens Advice is offered how?

A

At physical centres as well as online and via email and telephones

97
Q

Give 3 examples of areas covered by financial advice from Citizens Advice

A

Any 3 from debt, benefits, banking, pensions and insurance

98
Q

What does IFA stand for?

A

Independent financial advisor

99
Q

Who are IFAs?

A

Professionals who offer independent advice to their clients on financial matters

100
Q

Give 2 examples of financial matters that IFAs may give advice on

A

Any 2 from savings, investments, mortgages and pensions

101
Q

Price comparison websites

A

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

102
Q

Money advice service is an independent/government organisation

A

government

103
Q

What is the money advice service set up to do?

A

Offer free and impartial financial advice in the UK

104
Q

Who are debt counsellors?

A

Professionals who offer independent advice on how best to manage debt

105
Q

Individual voluntary arrangements (IVAs) bankruptcy is an independent/government organisation

A

government

106
Q

What does IVAs bankruptcy allow?

A

Individuals to declare themselves bankrupt while agreeing to pay all or part of the money they owe to creditors through an insolvency practitioner

107
Q

IVAs bankruptcy allows individuals to declare themselves bankrupt while agreeing to do what?

A

Pay all or part of the money they owe to creditors through an insolvency practitioner

108
Q

True/False: IVAs bankruptcy allows individuals to declare themselves bankrupt while agreeing to pay all of the money they owe to creditors through an insolvency practitioner

A

False, it can be all or part of the money they owee

109
Q

When declaring yourself bankrupt with IVA bankruptcy, who are regular payments made to?

A

The insolvency practitioner who then spreads this across the creditors deciding how much to pay each one

110
Q

When declaring yourself bankrupt with IVA bankruptcy, regular payments are made to the insolvency practitioner who then does what?

A

Spreads this across the creditors deciding how much to pay each one

111
Q

Give 2 advantages of Citizens Advice

A

Any 2 from it is a free service and offers face to face as well as online and telephone advice and a wide range of areas are covered

112
Q

Give a disadvantage of Citizens Advice

A

Trained volunteers are not necessarily professionals in financial issues and therefore knowledge may be limited

113
Q

Give 2 advantages of an IFA

A

Any 2 from advice is offered by professionals in the field, services offered are regulated by the FCA and FOS and advisors will take time to understand an individual’s full financial situation

114
Q

Give a disadvantage of an IFA

A

Any from services will be charged for and advice offered is not guaranteed to be 100% up to date or unbiased

115
Q

Give an advantage of a price comparison website

A

Any from easy to access 24/7 and free service

116
Q

Give 2 disadvantages of price comparison websites

A

Any 2 from not guaranteed to be 100% up to date, accurate or unbiased, do not always cover all of the available options and potential for bias

117
Q

Give an advantage of money advice service

A

Any from government-funded therefore advice is free and impartial and covers a wide range of financial matters

118
Q

Give 2 disadvantages of money advice service

A

Any 2 from advice is only available online or over the telephone - no physical presence, can take time to find and understand the exact advice that is being searched for and advice can be generic rather than personal

119
Q

Give an advantage of debt counsellors

A

Any from advice is offered by a professional who specialises in debt management and services offered are regulated by the FCA and FOS

120
Q

Give a disadvantage of debt counsellors

A

Any from services will be charged for and advice will focus just on debt management rather than the whole package of financial concerns

121
Q

Give an advantage of Individual Voluntary Arrangements (IVAs) bankruptcy

A

Any from helps manage debt repayment with regular payments making budgeting easier and independent advice, without bias

122
Q

Give a disadvantage of Individual Voluntary Arrangements (IVAs) bankruptcy

A

Any from set up and handling fees are charged for the service and will affect future credit ratings

Personal and Business Finance (6 decks)

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