Methods Of Payment

Question 1

Cash

Answer 1

Notes and coins in a wide range of denominations

+ Not open to fraud in the way a cheque is
+ Business receives payment immediately

• Large sums of money would have to be taken to the bank
• Can only sell direct to the customer and not by the internet

Question 2

Cheque

Answer 2

An instruction to a bank to take money out of the drawer’s account and put it into the payee’s account

+ Banks will guarantee a cheque up to a certain amount via a cheque guarantee card
+ Takes approximately 5 days to clear

• If inadequate funds are in the account the cheque could “bounce”
• Some banks charge businesses for paying cheques into their account

Question 3

Credit Card

Answer 3

People borrow money up to a specific limit that they will pay back and interest is charged onto the money that’s borrowed, each month a payment has to be made

+ Easy way to borrow money
+ Secure/protected and can be used abroad

• Businesses have to pay fee for customers to use their credit card
• Interest charges can be high and could cause debt

Question 4

Debit Card

Answer 4

Linked to your bank account so money comes straight out of your account with only the money you have

+ An instant payment
+ Don’t get into debt

• If you don’t have the money in your account, your card gets declined

Question 5

Direct Debit

Answer 5

Allows customers to pay regular bills automatically

+ Direct debits are free and some come with discounts
+ Automatic bills sent out and there’s no debt, shows consistency to sellers

• Customers need to ensure they have sufficient funds to make payments
• Companies can change how much you have to pay

Question 6

Credit / Bank Transfer

Answer 6

A way to put money straight into an account e.g. businesses use it to pay employees and suppliers

+ A safe way to make payments to people

• Sufficient funds needed to make payments

Question 7

Standing Order

Answer 7

Setting up your own fixed payment to a person and you set your own amount to pay

+ Good for savings as money automatically goes into your savings account

• Sufficient funds needed

Question 8

Electronic Cheque

Answer 8

Electronic payment that does the same job as a paper cheque but it’s more secure

+ More secure as they are authorised with different security procedures with a digital signature

Question 9

Pre-paid Credit / Currency Card

Answer 9

You put money on the card e.g. for holiday

+ Less risk as it can be stopped and can get stolen money back
+ A safe and secure way to carry money and may get a better exchange rate