methods of payment

Question 1

cash

Answer 1

notes and coins

Question 2

advantages of cash

Answer 2

most widely accepted form of payment and makes budgeting easier.

Question 3

disadvantages of cash

Answer 3

can be lost or stolen and can be used online

Question 4

advantages of debit card

Answer 4

widely accepted and suitable for all physical and virtual transactions. Low risk of theft

Question 4

debit card

Answer 4

issued by banks with payments for goods and services being deducted directly from current account

Question 5

disadvantages of debit cards

Answer 5

not appropriate for small transactions. short time lapse between money spent and money deducted from account which may result in overspending.

Question 5

credit card

Answer 5

issued by financial institution allowing customers to delay payments for goods and services

Question 6

advantages of credit cards

Answer 6

most widely accepted card, suitable for online transactions, allows for a period of interest free credit (1 month)

Question 6

disadvantages of credit cards

Answer 6

limit set amount of credit allowed. Very high interest rates ( around 22%). can encourage customers to overspend and go into debt.

Question 7

cheque

Answer 7

written order to a bank to make a payment for a specific amount of money from one person to another

Question 7

disadvantages of a cheque

Answer 7

easy for consumers to make errors when writing the cheque which will create problems for both the consumer and recipient

Question 8

advantages of a cheque

Answer 8

low risk form of payment as cheque can only be cashed in by the named payee. no need to provide change it can be written to the exact amount.

Question 9

electronic transfer

Answer 9

payment is transfered directly from one bank account to another

Question 9

advantages of electronic transfer

Answer 9

almost instant. no additional cost required. provides record of payment.

Question 10

disadvantages of electronic transfer

Answer 10

risk of loss if the transfer is incorrectly set up. not appropriate for face to face transactions.

Question 11

direct debit

Answer 11

agreement made with bank allowing third party to take an amount of money away from your account. amount can vary. i.e. gas bill

Question 12

advantages of direct debit

Answer 12

quick and easy to set up. easy way to make regular payments

Question 13

disadvantages of direct debit

Answer 13

payer determines the amount paid each time making it hard for the payee hard to plan expenditure

Question 14

standing order

Answer 14

agreement with bank to let a third party take a fixed sum of money out on a set day. i.e.

Question 15

advantages of a standing order

Answer 15

same amount each month making it easy to budget, easy to set up and cancel

Question 16

disadvantages of a standing order

Answer 16

payments will continue to be taken unless cancelled. Payments will be taken regardless of the the customers balance which could lead to the unplanned use of overdraft.

Question 17

pre-paid card

Answer 17

money is uploaded to a card with transactions then being made to reduce balance .

Question 18

advantages of a pre paid card

Answer 18

can set a budget in advance to avoid overspending, effective way of controlling how much you spend.

Question 19

disadvantages of a pre paid car

Answer 19

no protection if lost, sometimes requires an initial fee to purchase or set up the card e.g. Oyster

Question 20

contactless card

Answer 20

card containing antennae allow money to be transferred through tapping on a contactless terminal .

Question 21

advantages of a contactless card

Answer 21

gaining in popularity, secure method of payment

Question 22

disadvantages of a contactless card

Answer 22

often only accepted for relatively small transactions, not widely accepted as seen as new technology

Question 22

charge card

Answer 22

issued by financial institutions allowing customers to delay payments for goods and services for a short period of time. the balance must be paid off in fully when a statement is issued.

Question 23

advantages of a charge card

Answer 23

reduces risk of running up debts, allows short period of credit and it avoids you needing to carry cash with potential additional perks.

Question 24

disadvantages of a charge card

Answer 24

must be paid in full each month , also most of the time there is an annual fixed fee that is applied

Question 25

store card

Answer 25

issued by retailer outlet so that customers can delay payments for goods and services

Question 26

advantages of a store card

Answer 26

allows a short time interest free period ( 1 month), offer often discounts and loyalty schemes

Question 27

disavantages of a store card

Answer 27

only accepted in store that issued the card or linked associations. interest is paid on outstanding balance.

Question 28

mobile banking

Answer 28

ability to carry out financial transactions using a mobile device ( phone/tablet)

Question 29

advantages of mobile banking

Answer 29

convenient as can be used at any given time/place, also a very secure method of payment

Question 30

disadvantages of mobile banking

Answer 30

features still limited, mobile banking does not offer everything like internet banking.

Question 31

BACS

Answer 31

system that allows the transfer of payments from directly from one account to another.

Question 32

advantages of BACS

Answer 32

almost instant transactions that are guaranteed within two hours, no additional cost. can be accessed through bank, or on the telephone

Question 33

disadvantages of BACS

Answer 33

faster payments are not offered by all banks/branches which means the customer may have a BACs that takes 3 days to send the money over to another account, there is a limit on the amount of money that you can transfer in a single transaction.

Question 34

CHAPS

Answer 34

system that allows the transfer of payments from directly from one account to another.

Question 35

advantages of CHAPS

Answer 35

no limit on how much money can be transfered in any single transaction, transfer made same day

Question 36

disadvantages of CHAPS

Answer 36

normally there is a fixed charge per transaction regardless of amount transferred