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Business Unit 3 > Section B > Flashcards

Section B Flashcards

1
Q

What are financial insitutions?

A

organisations that offer financial services to individuals and businesses

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2
Q

Give some examples of financial insitutons.

A
  • banks
  • insurance companies
  • pawnbrokers
  • credit unions
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3
Q

What’s the bank of England’s role?

A

to maintain a healthy level of financial responsibility in the country
they do this by setting interest rates, control the national debt and they lend to banks

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4
Q

What is the advantage of the bank of England?

A

to achieve economic stability

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5
Q

What is the disadvantage of the bank of England?

A

they can raise or lower interest rates which directly affect people who play interest on loans

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6
Q

What is the features of a bank?

A

it handles financial transactions and sores money on behalf of its customers

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7
Q

What is the disadvantage of a bank?

A

savings are only protected up to £85,000 so if the bank goes bankrupt you will lose any money you have over this amount

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8
Q

What is the feature of building societies and credit unions?

A

Organisations that handle financial transactions and store money on behalf of their customers

Customers are “members” who own part of the organisation and have voting rights

Sometimes there is a motivation to support a specific community of types of members

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9
Q

What is the advantage of building societies and credit unions?

A

Interest rates they offer are usually higher than traditional banks

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10
Q

What is the disadvantage of building societies and credit unions?

A

Money is only protected up to £85,000, lack the business drive of a commercially motivated bank so not always as convenient

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11
Q

What is the features of national savings and investments?

A

Is a government backed organisation that offers a range of secure savings options such as ISAs, premium bonds, other types of bonds, gilts

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12
Q

What is the advantage of national savings and investments?

A

As they are backed by the government, they often offer 100% backing of all your financial deposits (not just up to £85,000)

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13
Q

What is the disadvantages of national savings and investments?

A

As they are not present on the high street, access is more limited

There is a process that you need to follow to put money in or take money out so it is not immediate

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14
Q

What is an insurance company?

A

to protect you against any unexpected losses or financial expenses

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15
Q

What is the advantages of an insurance company?

A

Regular monthly payments makes planning for the expense easy.

Wide range of services and levels of cover to suit your individual needs making it suitable and affordable.

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16
Q

What are the disadvantages of an insurance company?

A

Premiums are assessed on the estimated degree of risk which may seem very unfair to some segments of the population.

They are profit making organisation, therefore premiums are charged to ensure shareholders needs are met.

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17
Q

What is a pension company?

A

A businesses that sell policies to individuals either privately (private pension) or through their employers (workplace pension) to help them save/plan for future retirement

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18
Q

What are the advantages of a pension company?

A

Payments into your pension plan are taken directly out of your pay check before you even get it which helps reduce your tax responsibility

Your employer fully or partially matches your contribution

Then, expert financial investors work for the pension company and they invest the customers contributions in order to help the contributions grow.

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19
Q

What is the disadvantage of a pension company?

A

This is not a guarantee and there is a risk.

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20
Q

What is the features of pawnbrokers?

A

Business that lends money against an item of security for example a piece of jewellery or a piece of equipment

If the money is not repaid within a specific amount of time, then the item is sold off to pay the debt

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21
Q

What is the advantages of a pawnbroker?

A

A quick way or getting cash for a short period of time

The item used as security can be bought back from the pawnbroker within a defined period of time

No interest is charged

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22
Q

What is the disadvantages of a pawnbroker?

A

The amount of money loaned against the secured item is much lower than its actual value

Run the risk of losing your item if you can’t re-pay

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23
Q

What is a payday loan?

A

a quick way of requiring cash that is needed for a short period of time

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24
Q

What is the advantages of a payday loan?

A

its a fast way of getting cash for emergencies

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25
Q

What is the disadvantages of a payday loan?

A

Interest rate charges are very high

The amount you pay back is substantially higher than the original amount you borrowed.

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26
Q

What are the risks of a payday loan?

A

Check there is no hidden fees

There is a charge if payment is late

The interest rate (can be really high- usually 60-80%)

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27
Q

What are the 5 methods of banks communicating with customers?

A

in the bank branch
online banking
telephone banking
mobile banking
postal banking

28
Q

What is the advantages of communicating in the bank branch?

A

-Build relationship and trust

-Immediate transactions

29
Q

What is the advantages of online banking?

A

-Convenient

-24/7 availability

30
Q

What is the advantages of telephone banking?

A

-Convenient- can be completed from home

-no additional charges

31
Q

What is the advantages of mobile banking?

A

-Convenient

-No additional charges

32
Q

What is the advantages of postal banking?

A
  • No technology or devices required

-Traditional methods that some customers feel comfortable with

33
Q

What is the disadvantages of communicating with customers in the bank branch?

A

-Bank opening hours

-Long queues

34
Q

What is the disadvantages of online banking?

A

-Time consuming to set up

-Not suitable for cash withdrawals

35
Q

What is the disadvantages of telephone banking?

A

-Set hours

-Automated systems can be frustrating

36
Q

What is the disadvantages of mobile banking?

A

-Security risk with loss of device –Prone to hacker texts

37
Q

What is the disadvantages of postal banking?

A

-Slow due to postal system

-Post can get lost

38
Q

What does FCA stand for?

A

Financial conduct authority

39
Q

What does FOS stand for?

A

Financial Ombudsmen service

40
Q

What does FSCS stand for?

A

financial services compensation scheme

41
Q

What does FCA stand for?

A

office of fair trading

42
Q

What is the purpose of financial conduct authority?

A
  • makes sure customers are treated fairly
  • ensures organisations focus on customers
43
Q

What is the purpose of FOS?

A
  • A customer can contact them if they have a complaint against their bank
  • established by the Government and is free to use
44
Q

What is the purpose of FSCS?

A
  • pays compensation to a consumer of financial services if the financial services provider is unable to pay
  • set up by parliament
45
Q

What is the office of fair trading?

A
  • a governmental organisation to regulate all markets to encourage healthy competition
46
Q

Define a consumer credit law.

A

are laws passed by the UK government to enforce regulation of any firm offering credit to consumers eg. leasing, creedit cards ect.

47
Q

Is a mortgage regulated by consumer credit Act?

A

No

48
Q

What is Citizens advice?

A

Run by charities – offers advice on financial and non-financial issues e.g. debt, banking and pensions

49
Q

what are the advantages of citizens advice?

A

Free

Face to face and online

Wide range covered

50
Q

what are the disadvantages of citizens advice?

A

Limited information about topics

Limited availability of appointments

51
Q

what are independent financial advisors?

A

Professionals who offer independent advice to their customers on their financial matters e.g. savings, mortgages, pensions etc

52
Q

What are price comparison websites?

A

Websites that collate prices for similar goods and services in a certain industry e.g. car or house insurance

53
Q

What are money advice services?

A

Government organisation that offers free financial advice

54
Q

What are debt counsellors?

A

A professional who offers independent advice on how best to manage debt

Reviews individual financial situations and advises on best course of action e.g. spending habits etc

55
Q

What are the advantages of independent financial advisors?

A

Professional advice offered

In-depth knowledge

56
Q

What are the advantages of price comparison websites?

A

Available 24/7

Free

57
Q

What are the advantages of money advice services?

A

Free service

Covers a wide range of services

58
Q

What are the advantages of debt counsellors?

A

Professional advice

Regulated by FCA and FOS

59
Q

What are the disadvantages of independent financial advisors?

A

Expensive

May be out of date/ biased

60
Q

What are the disadvantages of price comparison websites?

A

May be out of date/ inaccurate

Does not include all businesses

61
Q

What are the disadvantages of money advice services?

A

No physical service option

62
Q

What are the disadvantages of debt counsellors?

A

Charge for services

Focus on debt only

63
Q

What is individual voluntary arrangements bankruptcy?

A

Government organisation that allows an individual to declare themselves bankrupt while agreeing to pay all or part of the money that they owe through an insolvency practitioner.

Regular payments are made to the insolvency practitioner and then they will spread this money across the creditors that money is owed to and they will decide how much to pay each one. Personal circumstances and income are taking into account to make the payment manageable.

64
Q

What are the advantages of the individual voluntary arrangements bankruptcy?

A

Helps manage debt repayment

Independent advice provided

65
Q

What are the disadvantages of the individual voluntary arrangements bankruptcy?

A

Fees are charged for the service

Business Unit 3 (5 decks)

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