Methods of payment

Question 1

2 Advantages of a Cheque

Answer 1

1. Low risk form of payment because only the person who named as the payee can cash in the cheque.
2. No need to provide change as can be written for an exact amount.

Question 2

2 Disadvantages of a Cheque

Answer 2

1. Expensive for the consumer if the bank refuses to clear the Cheque.
2. Viewed as old fashion

Question 3

2 Advantages of a pre-paid card

Answer 3

1. Avoids overspending

2. Good way of controlling amount spent by children e.g. school dinner card money

Question 4

2 Disadvantages of a pre-paid crad

Answer 4

1. No protection if lost

2. Sometimes requires an initial fee to purchase or set up the card

Question 5

2 Advantages of a charge card

Answer 5

1. Reduces risk of running up debts

2. Allows a short period of credit

Question 6

2 Disadvantages of a charge card

Answer 6

1. Must be paid in full each month

2. Often an annual fix fee is applied

Question 7

2 Advantages of a store card

Answer 7

1. Loyalty scheme

2. Short period of tax free credit

Question 8

2 Disadvantages of a store card

Answer 8

1. Only accepted in issuing store

2. Interest is paid on outstanding balances

Question 9

2 Advantages of Banker’s Automated Clearing Service (BACS) faster payment

Answer 9

1. Allows almost instant transfers that are guaranteed within 2 hours
2. No additional costs

Question 10

2 Disadvantages of Banker’s Automated Clearing Service (BACS) faster payment

Answer 10

1. Limit is set on the amount that can be transferred in any single transaction
2. Faster payment is not offered by all banks

Question 11

2 Advantages of Clearing House Automated Payment Systems (CHAPS)

Answer 11

1. Transfers can be made the same day

2. No limit on the amount that can be transferred in a single transaction

Question 12

A disadvantage of Clearing House Automated Payment Systems (CHAPS)

Answer 12

There is a fixed charge per transaction regardless of the amount transferred