Payment Methods

Question 1

What payment system has increased in use over recent years?

Answer 1

Electronic payments

Question 2

What payment system has decreased over recent years?

Answer 2

Paper based payments eg Cheques

Question 3

What is cash payments used for in businesses?

Answer 3

Cash wages or petty cash

Question 4

What risk is associated with using a cheque?

Answer 4

It bouncing as it is incorrect

Question 5

What type of card is commonly used for making purchases?

Answer 5

Debit card

Question 6

What card is purchased by the user and has to have a preloaded balance in order for it to be used?

Answer 6

Prepayment card

Question 7

What are credit cards used for?

Answer 7

They are used to make purchases which will be paid off partly or fully at the end of the month on receipt of a statement

Question 8

What are charge cards?

Answer 8

Charge cards are a form of credit card popular with businesses; the amount spent on the card will need to be settled in full each month. (American Express is an example)

Question 9

What is BACs does it stand for and what is it used for?

Answer 9

Bankers automated clearing services used for making direct payments between bank accounts by standing order, direct debit and direct credit. It takes three working days for the money to be transferred

Question 10

What is faster payments?

Answer 10

Faster payments is a same day two hour computer payment service used by the banks for standing orders, telephone and online payments.

Question 11

What system is used for same day payments for large amounts of money?

Answer 11

CHAPS (Clearing House Automated Payments System) - electronic

Bank draft (bank paper document, similar to a cheque, issued by the bank)

Question 12

Define: cheque

Answer 12

A cheque is an instruction in writing, signed by the banks customer (who is paying the money) telling the bank to pay an amount to a named person or business

Question 13

Define: debit card

Answer 13

Is a card which can be used for purchases and cash withdrawals; payment is taken from the bank account on the next working day

Question 14

Define: pre-payment card

Answer 14

A card which can be purchased and is given a balance to spend, however it can be topped up when the balance is running low. (Preloaded card)

Question 15

Define: credit card

Answer 15

A card issued on a ‘buy now and pay later’ basis; payment is made monthly in full or in part on receipt of the statement

Question 16

Define: charge card

Answer 16

A card issued on a ‘buy now and pay later’ basis; payment is made monthly in full by the user. These are typically used in businesses, an example of a charge card would be American Express

Question 17

Define: electronic bank transfer

Answer 17

A term used to describe the electronic transfer of funds through the banks computer system

Question 18

Define: BACS

Answer 18

Bankers Automated Clearing System- a system set up by the banks to make computer based direct payments between bank accounts.

Question 19

Define BACS direct credit

Answer 19

Direct BACS payments between bank accounts with a three working day clearance

Question 20

Define: standing order

Answer 20

Regular (fixed date and amount) payment, set up with the bank by the business sending the money. They can be processed by BACS or by faster payment

Question 21

Define: direct debit

Answer 21

Variable date and amount BACS payments, set up by the organization receiving the payment

Question 22

Define: Faster Payments

Answer 22

Same day payment (usually 2 hours) between banks- the instructions can be given at the bank branch, by telephone or online

Question 23

Define CHAPS

Answer 23

Clearing House Automated Payment System.

High value same day payment. Sent through the banks computer system. They can not be cancelled after they have been sent

Question 24

Define: bank draft

Answer 24

A paper based document (similar to a cheque) issued by a bank- as good as cash- used for high value purchases, it can not be stopped or cancelled after it has been issued.