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Business Unit 3 > Section A > Flashcards

Section A Flashcards

1
Q

What are the functions of money?

A
  • unit of account (have a value on goods)
    -means of exchange (buy things)
    -store of value (use in future as it keeps its value)
  • legal tender (legally recognised as a form of payment)
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2
Q

What is the role of money affected by?

A

-personal attitudes to saving ect.
-culture eg. credit cards
- life events eg. marriage
-external influences eg. tax changes

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3
Q

What are interest rates?

A

They can fluctuate and when they are low you are more willing to borrow money (loan or mortgage)

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4
Q

Define expenditure.

A

Money you pay out

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5
Q

What is debt?

A

Money owed and can have interest and if not paid on time it can affect your credit rating

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6
Q

What is credit rating?

A

a score given to people based on how likely they are to repay their debt determined by their previous actions

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7
Q

What does bankrupt mean?

A

When your debt spirals out of control and you are unable to pay it back

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8
Q

What does solvent mean?

A

having the ability to meet your day to day expenditures and repay your debts

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9
Q

Give some common principles on how to manage personal finances

A
  • set financial targets and goals
  • avoid going into debt
  • maintain a good credit rating
  • remain solvent
  • generate income and savings
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10
Q

What are the 14 different ways to pay?

A

cash
debit card
credit card
cheque
electronic transfer
direct debt
standing order
pre paid card
contactless card
charge card
store card
mobile banking
BACs
CHAPS

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11
Q

Give the feature of cash.

A

notes and coins in a range of denominations

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12
Q

Give the feature of debit cards.

A

issued by banks and pays using money direct from current account

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13
Q

Give the feature of credit cards.

A

issued by financial institutions allowing customers to delay payments

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14
Q

Give the feature of cheques.

A

written order to a bank to make a payment of a specific amount from one persons account to another account

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15
Q

Give the feature of electronic transfers

A

payments that are transferred directly from one bank account to another

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16
Q

Give the feature of direct debt

A

an agreement with a bank to allow a third party to withdraw money from an account on a set day

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17
Q

Give the feature of standing order

A

an agreement made with a bank to transfer a fixed amount of money to a third party account on a set date on a regular basis

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18
Q

Give the feature of pre- paid card

A

when money is uploaded onto a card so transactions can be withdrawn which will reduce the balance

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19
Q

Give the feature of contactless

A

cards that allow money to be transferred when the card touches a contacless terminal

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20
Q

Give the feature of charge cards.

A

issued by financial institutions allowing customers to delay payments for a short period of time but the payment must be paid off in full when a statement is issued

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21
Q

Give the feature of store cards.

A

issued by a retail outlet so that customers can delay payments

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22
Q

Give the feature of mobile banking

A

the ability to carry out financial transactions using mobile devices

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23
Q

Give the feature of BACS

A

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

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24
Q

Give the feature of CHAPS

A

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

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25
Q

What is the full name for BACS?

A

Bankers automated clearing service

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26
Q

What is the full name for CHAPS?

A

clearing house automated payment systems

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27
Q

Give 2 advantages of cash.

A
  • makes budgeting easier
  • widely accepted
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28
Q

Give 2 advantages of debit cards.

A
  • can be used online
  • dont need to carry cash
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29
Q

Give 2 advantages of credit cards

A
  • widely accepted
  • can be used online
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30
Q

Give 2 advantages of cheques.

A
  • no need to provide change as can be written for exact amount
  • low risk as can only be cashed by named payee
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31
Q

Give 2 advantages of electronic transfer.

A
  • instantaneous
  • no additional costs
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32
Q

Give 2 advantages of direct debit.

A
  • quick and easy to set up
  • easy way to make regular transactions
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33
Q

Give 2 advantages of standing orders.

A
  • easy to set up and cancel
  • dont need to remember to make regular, standard payments
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34
Q

Give 2 advantages of pre paid cards

A
  • can set a budget to avoid overspending
  • effective way of controlling amount spent by children
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35
Q

Give 2 advantages of contactless cards.

A
  • secure method of making payments
  • gaining in popularity
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36
Q

Give 2 advantages of charge cards.

A
  • allows a short period of credit
  • often offers additional benefits
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37
Q

Give 2 advantages of store cards.

A
  • allows a short period of credit that is free
  • often offers loyalty schemes, discounts ect.
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38
Q

Give 2 advantages of mobile banking.

A
  • secure
  • convenient as can be used at any time any place
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39
Q

Give 2 advantages of BACS.

A
  • no additional costs
  • allows almost instant transfers
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40
Q

Give 2 advantages of CHAPS.

A
  • no limit on the amount that can be transferred
  • the transfers can be made during the same day
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41
Q

Give 2 disadvantages of cash.

A
  • can be lost or stolen
  • cannot be used online
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42
Q

Give 2 disadvantages of debit cards.

A
  • not appropriate for small transactions
  • short time before money is withdrawn from account which can lead to overspending
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43
Q

Give 2 disadvantages of credit cards.

A
  • interest is charged on balances not paid
  • limit set on the amount of credit allowed
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44
Q

Give 2 disadvantages of cheques.

A
  • viewed as old fashioned
  • can bounce
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45
Q

Give 2 disadvantages of electronic transfer.

A
  • risk of loss if the transfer is set up incorrectly
  • not appropriate for face- face transactions
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46
Q

Give 2 disadvantages of direct debt.

A
  • payer determines amount paid each time, making it difficult for payee to plan and budget
  • if payer makes a mistake and takes too much it is payees responsibility to claim the money back
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47
Q

Give 2 disadvantages of standing order.

A
  • payments are taken regardless of the customers balance
  • payments will continue to be made unless cancelled
48
Q

Give 2 disadvantages of pre-paid card.

A
  • no protection if lost
  • sometimes require an initial fee to set up card
49
Q

Give 2 disadvantages of contactless card.

A
  • often only accepted for relatively small transactions
  • still not widely accepted as seen as new technology
50
Q

Give 2 disadvantages of charge cards.

A
  • must be paid in full each month
  • often an annual fixed fee is applied
51
Q

Give 2 disadvantages of store cards.

A
  • only accepted in issuing store or linked associations
  • interest is paid on outstanding balances
52
Q

Give a disadvantage of mobile banking.

A
  • features are still limited and hence mobile banking does not offer all of the functionality of internet banking
53
Q

Give 2 disadvantages of BACS.

A
  • a limit is set on amount that can be transferred in any single transaction
  • faster payment is not offered by all banks or branches and the customer may therefore have to default to BACs
54
Q

Give a disadvantage of CHAPS.

A
  • normally, there is a fixed charge per transaction regardless of the amount transferred
55
Q

Define a current account.

A

an account with a bank or building society that is designed for frequent use

56
Q

Give 4 features of a current account.

A
  • change to meet customer needs
  • bank pays you interest on your balance
  • overdraft limit
  • you pay bank interest on your overdraft
57
Q

What are the 4 different types of current accounts?

A
  • basic
  • standard
  • student
  • premium
58
Q

What is a standard current account?

A
  • most common type
  • given to those with a good credit rating
  • pay you interest
59
Q

Give some 2 advantages of a standard account.

A
  • overdraft facility
  • can make regular withdrawals
60
Q

Give 2 disadvantages of a standard account.

A
  • high charge for overdraft
  • no additional perks eg. insurance ect.
61
Q

What is a premium current account?

A
  • get additional features like car or house insurance
  • ability to use debit card overseas without additional charges
62
Q

Give 2 advantages of a premium account.

A
  • additional perks eg. insurance
  • convenient for regular payments
62
Q

Give 2 disadvantages of a premium account.

A
  • perks may not be good value
  • monthly charge for the account
63
Q

What is a basic current account?

A
  • no overdraft limit
  • no interest paid to you by the bank on your positive balance
64
Q

What are the advantages of a basic current account?

A
  • available for customers with low credit rating
  • basic facilities provided eg. payments and withdraws
65
Q

What are the disadvantages of a basic current acount?

A
  • no overdraft
  • no interest paid on positive balances
66
Q

What is a student current account?

A

-For students and banks are keen for students as customers as their financial needs will grow

67
Q

What are the advantages of a student current account?

A
  • convenient for payment of course fees and recieving student loan payments
  • bonus offered eg. free rail card, discounts
68
Q

What are the disadvantages of a student account?

A
  • overdraft could encourage overspending
  • limited facilities provided
69
Q

Define overdraft

A

allows you to withdraw money that you dont have from a current account

70
Q

Define a personal loan

A

enables you to borrow a specific amount of money, often for a specific item, and be paid back during a specified time frame

71
Q

Define hire purchase

A

Allows you to take possession of an item immediately but pay for it later in monthly payments. The item remains the property of the company until you have paid it off

72
Q

Define mortgage

A

A long-term loan to fund the purchase of an asset. Secured through the asset.

73
Q

Define credit card

A

Allows you to purchase items and pay later (usually at the end of the month – statement is sent)

74
Q

Define a payday loan

A

A short term source of loan used to bridge the gap until your next payday

75
Q

What is the advantages of an overdraft?

A
  • interest is charged only on the amount unpaid
  • a short term solution to cash flow problems
76
Q

What is the advantages of a personal loan?

A
  • useful when you want to buy something expensive eg. car
  • monthly, pre-arranged re-payment schedule so you can budget
77
Q

What is the advantages of hire purchase?

A
  • flexibility to repayments
  • fixed interest rates- not unexpected
78
Q

What is the advantages of a mortgage?

A
  • provides a sense of stability that renting doesn’t offer
  • you can buy and use items straight away eg. a house
79
Q

What is the advantages of a credit card?

A
  • provides protection on item brought
  • able to use it up to your pre-determined spending limit on anything you want
80
Q

What is the advantages of a payday loan?

A
  • easy to get/ quick solution to a cash shortage
  • can get approved even with bad credit
81
Q

What is the disadvantages of an overdraft?

A
  • interest on amount used is high
  • since easy to access its easy to overspend
82
Q

What is the disadvantages of a personal loan?

A
  • takes time to apply and secure
  • secured against another asset so if you dont repay, the asset will be repossessed
83
Q

What is the disadvantages of hire purchase?

A
  • interest charges are high
  • you dont own the item until it is completely paid off
84
Q

What is the disadvantages of a morgage?

A
  • penalty may apply to early repayment
  • asset will be repossessed if you fail to pay
85
Q

What is the disadvantages of a credit card?

A
  • interest rates are high
  • encourages overspending as it is easy to use
86
Q

What is the disadvantages of a payday loan

A
  • high interest rates
  • easy to get trapped in a cycle of debt
87
Q

Define bonds

A

It is issued by a country’s government where they borrow your money and promise to repay your money at a fixed rate of interest at a specified time.

88
Q

Why do governments issue bonds?

A

in order to borrow money to help pay their bills

89
Q

What are the UKs bonds called?

A

Gilts

90
Q

Define a premium bond

A
  • an investment between £100 and £50,000 for an indefinite period of time
  • a monthly lottery is drawn per pound invested and awards are given out up to £1 million tax free
    and you can withdraw your money whenever but can take up to 8 days.
91
Q

What is an ISA?

A

an individual savings account, that tends to have a higher interest rate

92
Q

What is the advantages of ISAs?

A
  • interest rates are higher than most saving accounts
  • protect your money from income tax
93
Q

What is the advantages of deposit and savings accounts?

A
  • interest is earned on your balance
  • can withdraw your money anytime
94
Q

What is the advantages of bonds?

A
  • have legal protection
  • government repays you at a fixed rate of interest at a specified time
95
Q

What is the advantages of premium bonds?

A
  • can be completed online and usually only takes 8 days for funds to reach bank account
  • an opportunity to earn a lot more money than a savings account
96
Q

What is the advantages of shares?

A
  • protected against inflation
  • higher returns than cash investment
97
Q

What is the advantages of pensions?

A
  • companies can contribute to the employees pension
  • help people to plan their financial future
98
Q

What is the disadvantages of ISAs?

A
  • have to give bank notice when you want to withdraw and will take a few days
  • only allowed to make a certain number of withdraws per year
99
Q

What is the disadvantages of deposit and savings accounts?

A
  • you pay tax on interest earned
  • interest rate is lower than an ISA and a loan
100
Q

What is the disadvantages of bonds?

A
  • risk of inflation which may impact the return
  • can damage your credit
101
Q

What is the disadvantages of premium bonds?

A
  • no guarantee you will ever earn any money from the lottery
  • to withdraw the money you have to fill out a form and wait 8 days
102
Q

What is the disadvantages of shares?

A
  • very risky as no guarantee of a return of investment
  • shares fluctuate which could lead to loss in investment
103
Q

What is the disadvantages of pensions?

A
  • risk you may run out of money in retirement
  • have to regularly review investments to ensure you are on track
104
Q

What are the advantages of car insurance?

A
  • protects the driver and passenger
  • repairs or replaces spare parts, damages or theft
105
Q

What are the advantages of home and contents insurance?

A
  • potentially saves you money
  • you always feel protected
106
Q

What are the advantages of life assurance and insurance?

A
  • gives you a peace of mind
  • can cover debt left
107
Q

What are the advantages of travel insurance?

A
  • covers most medical costs
  • compensates for lost, stolen or damaged luggage or personal items
108
Q

What are the advantages of pet insurance?

A
  • gives you peace of mind
  • covers fees if pet becomes sick or injured
109
Q

What are the advantages of health insurance?

A
  • you get annual health checks
  • covers you in emergency situations
110
Q

What are the disadvantages of car insurance?

A

-time taking

-expensive

111
Q

What are the disadvantages of home and contents insurance?

A
  • may not include everything
  • many have an excess of £100
112
Q

What are the disadvantages of life assurance and insurance?

A

-you will pay high premiums

-if your health declines you may not be able to get one

113
Q

What are the disadvantages of travel insurance?

A
  • can be expenisve
  • claims can be rejected
114
Q

What are the disadvantages of pet insurance?

A
  • doesn’t cover pre- existing conditions
  • you still have to pay costs upfront, it just reimbursing you
115
Q

What are the disadvantages of health insurance?

A
  • very expensive
  • lots of paperwork- time consuming

Business Unit 3 (6 decks)

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