Methods of payment Flashcards
Cash
Physical notes and coins, available in a variety of amounts.
Debit card
Payment card that deducts money directly from a customers current account to pay for a purchase.
Credit card
issued by financial institutions allowing customers to delay payment for goods and services.
Cheque
a written order to a bank to pay a stated amount from an individual account to another.
Electronic transfer
payment is transferred directly from one bank account to another.
Direct debit
an agreement made with the bank allowing a third party to withdraw money from an account on a set day to pay for goods or services received.
Standing order
agreement made with a bank to transfer a fixed sum of money to a third party account on a set date on a regular basis.
Contactless
cards containing antennae allows money to be transferred when the card touches a contactless terminal.
Prepaid card
money is uploaded onto a card with transactions then being withdrawn to reduce the balance.
Charge card
issued by a financial institution allowing customers to delay payments for a short period of time, balance must be paid off in full when a statement is issued.
Store card
issued by a retail outlet so that customers can delay payments for goods and services, similar to a credit card but only used in store where it was issued.
Mobile banking
carrying out financial transactions using a mobile device such as phones or tablets
BACS(bankers automated clearing service)
an electronic system to make payments directly from one bank account to another
CHAPS(clearing house automated payment system)
a system that allows the transfer of payments.
Cash pro’s and con’s
Adv - widely accepted, makes budgeting easier, consumers feel confident when using.
Disadv - can be lost or stolen, threat of counterfeit, can not be used online
Debit card pro’s and con’s
Adv - widely accepted, suitable for online transactions, secure method of payment with low risk of theft.
Disadv - not accepted for small transaction, can encourage overspending.
Credit card pro’s and con’s
Adv - helps with unforeseen purchases, widely accepted, gives free access to money you don’t have
Disadv - charged high rates of interest, encourages customer to overspend and get into debt, limit set on amount of credit given
Cheque pro’s and con’s
Adv - low risk as cheque can only be cashed by the named payee, widely accepted for face-to-face and postal transactions.
Disadv - expensive if cheque bounces, time delay between writing the cheque and it being cashed could cause a consumer to go overdrawn, viewed as old fashioned
Electronic transfer pro’s and con’s
Adv - almost instantaneous, no additional costs, easy to use for one-off transactions.
Disadv - risk of loss if transfer is incorrectly set up, cant use face-to face
Direct debit pro’s and con’s
Adv - easy way to make regular payments, quick and easy to set up, exact amount paid
Disadv - if payer makes a mistake then payee needs to chase up, payer determines the amount each time making it difficult for the payee to plan and budget
Standing order pro’s and con’s
Adv - easy to set up and cancel, sae amount paid each time, no need to remember to make regular standard payments.
Disadv - payments taken regardless of customer balance, payments will continue to be made unless cancelled.
Contactless pro’s and con’s
Adv - popular method, secure method
Disadv - only accepted for relatively small transactions, still not widely accepted, card needs to be stopped if lost
pre paid card pro’s and con’s
Adv - helps overspending as set a budget, if lost or stolen the loss is limited to the remaining balance.
Disadv - no protection if lost, may require an initial fee to set up the card
Charge card pro’s and con’s
Adv - avoids carrying cash allows a short period of credit, reduces risk of running up debts
Disadv - must be paid of in full each month often an annual fixed fee is applied.
Store card pro’s and con’s
Adv - short period of interest free credit, often offer loyalty schemes, discounts and special promotions or privileges.
Disadv - only accepted in the issuing state, interest is paid on outstanding balance, encourages overspending.
Mobile banking pro’s and con’s
Adv - convenient, easy to use and secure
Disadv - features are limited so does not offer all the functionality of internet banking
BACS pro’s and con’s
Adv - fast payments, no additional costs, easily accessed.
Disadv - payment limits may be set, faster payments is not offered by all banks or branches and customers may have to default to BACS.
CHAPS pro’s and con’s
Adv - transfers are made the same day, no limit on amounts
Disadv - fixed charge per transactions regardless of amount
