Methods of Payment

Question 1

What is this method of payment?

Permission given to the bank to make regular payments to a third party (Utility bills, Netflix, Amazon, gyms etc)

Answer 1

Direct Debit

A standing order is also similar

Question 2

Advantages of a Debit Card

Answer 2

• No need to carry cash
• Secure method of payment with low risk of theft
• Widely accepted
• Offers a degree of protection on purchases
• Suitable for online transactions

Question 3

What are the features of a Pre-Paid Card?

Answer 3

Money is uploaded onto a card which then reduces each time a transaction takes place
e.g. school lunches or transport (oyster)

Question 4

What are the features of a Charge Card?

Answer 4

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 full when a statement is issued

Question 5

What are the features of a Store Card?

Answer 5

Issued by a retail outlet so that customers can delay payments for goods and services (similar to a credit card but only accepted by stores specified)

Question 6

What is BACS?

Banker’s Automated Clearing Service

Answer 6

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

May take a few days
Larger payments

Question 7

What is FPS?

Faster Payments Service

Answer 7

Direct transfer to another bank account

guaranteed within 2 hours but may be quicker

Question 8

What is CHAPS?

Clearing House Automated Payment Systems

Answer 8

Same day transfer of funds from one bank account to another

Of any amount

Question 9

The advantages of a Charge Card?

Answer 9

• Reduces risk of running up debts
• Allows a short period of credit
• Avoids the need to carry cash
• Often offers additional perks
• No interest

Question 10

The disadvantages of a Charge Card?

Answer 10

• Must be paid in full each month
• Often an annual fixed fee is applied
• Overdraft could happen

Question 11

The advantages of a Store Card?

Answer 11

• Allows a short period of credit that is interest free, e.g. one month
• Often offer loyalty schemes, discounts and special promotions or privileges

Question 12

The disadvantages of a Store Card?

Answer 12

• Only accepted in issuing store or linked associations
• Interest is paid on outstanding balances
• Can encourage overspending and result in a consumer getting into debt –particularly if they hold multiple cards

Question 13

The advantages of a Pre-Paid Card?

Answer 13

• Can set a budget in advance to avoid overspending
• If lost or stolen the loss is limited to the remaining
  balance
• An effective way of controlling the amount spent by children and where money is spent

Question 14

The disadvantages of a Pre-Paid Card?

Answer 14

• No protection if lost

- Sometimes requires an initial fee to purchase or set up the card, e.g. Oyster travel cards

Question 15

The disadvantages of BACS?

Answer 15

• If branchessCan take three days to transfer payments

- A limit is set on the amount that can be transferred in any single transaction

Question 16

The advantages of BACS and FPS?

Answer 16

• Can be accessed in a number of ways including in a branch, over the telephone and online
• No additional costs

Question 17

The disadvantages of CHAPS?

Answer 17

• Normally, there is a fixed charge per transaction regardless of the amount transferred

Question 18

The advantages of CHAPS?

Answer 18

• Same day transactions

- no limit on amount that can be transferred