methods of payment Flashcards
cash
notes and coins
advantages of cash
most widely accepted form of payment and makes budgeting easier.
disadvantages of cash
can be lost or stolen and can be used online
advantages of debit card
widely accepted and suitable for all physical and virtual transactions. Low risk of theft
debit card
issued by banks with payments for goods and services being deducted directly from current account
disadvantages of debit cards
not appropriate for small transactions. short time lapse between money spent and money deducted from account which may result in overspending.
credit card
issued by financial institution allowing customers to delay payments for goods and services
advantages of credit cards
most widely accepted card, suitable for online transactions, allows for a period of interest free credit (1 month)
disadvantages of credit cards
limit set amount of credit allowed. Very high interest rates ( around 22%). can encourage customers to overspend and go into debt.
cheque
written order to a bank to make a payment for a specific amount of money from one person to another
disadvantages of a cheque
easy for consumers to make errors when writing the cheque which will create problems for both the consumer and recipient
advantages of a cheque
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.
electronic transfer
payment is transfered directly from one bank account to another
advantages of electronic transfer
almost instant. no additional cost required. provides record of payment.
disadvantages of electronic transfer
risk of loss if the transfer is incorrectly set up. not appropriate for face to face transactions.
direct debit
agreement made with bank allowing third party to take an amount of money away from your account. amount can vary. i.e. gas bill
advantages of direct debit
quick and easy to set up. easy way to make regular payments
disadvantages of direct debit
payer determines the amount paid each time making it hard for the payee hard to plan expenditure
standing order
agreement with bank to let a third party take a fixed sum of money out on a set day. i.e.
advantages of a standing order
same amount each month making it easy to budget, easy to set up and cancel
disadvantages of a standing order
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.
pre-paid card
money is uploaded to a card with transactions then being made to reduce balance .
advantages of a pre paid card
can set a budget in advance to avoid overspending, effective way of controlling how much you spend.
disadvantages of a pre paid car
no protection if lost, sometimes requires an initial fee to purchase or set up the card e.g. Oyster
contactless card
card containing antennae allow money to be transferred through tapping on a contactless terminal .
advantages of a contactless card
gaining in popularity, secure method of payment
disadvantages of a contactless card
often only accepted for relatively small transactions, not widely accepted as seen as new technology
charge card
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.
advantages of a charge card
reduces risk of running up debts, allows short period of credit and it avoids you needing to carry cash with potential additional perks.
disadvantages of a charge card
must be paid in full each month , also most of the time there is an annual fixed fee that is applied
store card
issued by retailer outlet so that customers can delay payments for goods and services
advantages of a store card
allows a short time interest free period ( 1 month), offer often discounts and loyalty schemes
disavantages of a store card
only accepted in store that issued the card or linked associations. interest is paid on outstanding balance.
mobile banking
ability to carry out financial transactions using a mobile device ( phone/tablet)
advantages of mobile banking
convenient as can be used at any given time/place, also a very secure method of payment
disadvantages of mobile banking
features still limited, mobile banking does not offer everything like internet banking.
BACS
system that allows the transfer of payments from directly from one account to another.
advantages of BACS
almost instant transactions that are guaranteed within two hours, no additional cost. can be accessed through bank, or on the telephone
disadvantages of BACS
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.
CHAPS
system that allows the transfer of payments from directly from one account to another.
advantages of CHAPS
no limit on how much money can be transfered in any single transaction, transfer made same day
disadvantages of CHAPS
normally there is a fixed charge per transaction regardless of amount transferred
