Section B Flashcards
What are financial insitutions?
organisations that offer financial services to individuals and businesses
Give some examples of financial insitutons.
- banks
- insurance companies
- pawnbrokers
- credit unions
What’s the bank of England’s role?
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
What is the advantage of the bank of England?
to achieve economic stability
What is the disadvantage of the bank of England?
they can raise or lower interest rates which directly affect people who play interest on loans
What is the features of a bank?
it handles financial transactions and sores money on behalf of its customers
What is the disadvantage of a bank?
savings are only protected up to £85,000 so if the bank goes bankrupt you will lose any money you have over this amount
What is the feature of building societies and credit unions?
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
What is the advantage of building societies and credit unions?
Interest rates they offer are usually higher than traditional banks
What is the disadvantage of building societies and credit unions?
Money is only protected up to £85,000, lack the business drive of a commercially motivated bank so not always as convenient
What is the features of national savings and investments?
Is a government backed organisation that offers a range of secure savings options such as ISAs, premium bonds, other types of bonds, gilts
What is the advantage of national savings and investments?
As they are backed by the government, they often offer 100% backing of all your financial deposits (not just up to £85,000)
What is the disadvantages of national savings and investments?
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
What is an insurance company?
to protect you against any unexpected losses or financial expenses
What is the advantages of an insurance company?
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.
What are the disadvantages of an insurance company?
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.
What is a pension company?
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
What are the advantages of a pension company?
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.
What is the disadvantage of a pension company?
This is not a guarantee and there is a risk.
What is the features of pawnbrokers?
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
What is the advantages of a pawnbroker?
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
What is the disadvantages of a pawnbroker?
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
What is a payday loan?
a quick way of requiring cash that is needed for a short period of time
What is the advantages of a payday loan?
its a fast way of getting cash for emergencies
What is the disadvantages of a payday loan?
Interest rate charges are very high
The amount you pay back is substantially higher than the original amount you borrowed.
What are the risks of a payday loan?
Check there is no hidden fees
There is a charge if payment is late
The interest rate (can be really high- usually 60-80%)
What are the 5 methods of banks communicating with customers?
in the bank branch
online banking
telephone banking
mobile banking
postal banking
What is the advantages of communicating in the bank branch?
-Build relationship and trust
-Immediate transactions
What is the advantages of online banking?
-Convenient
-24/7 availability
What is the advantages of telephone banking?
-Convenient- can be completed from home
-no additional charges
What is the advantages of mobile banking?
-Convenient
-No additional charges
What is the advantages of postal banking?
- No technology or devices required
-Traditional methods that some customers feel comfortable with
What is the disadvantages of communicating with customers in the bank branch?
-Bank opening hours
-Long queues
What is the disadvantages of online banking?
-Time consuming to set up
-Not suitable for cash withdrawals
What is the disadvantages of telephone banking?
-Set hours
-Automated systems can be frustrating
What is the disadvantages of mobile banking?
-Security risk with loss of device –Prone to hacker texts
What is the disadvantages of postal banking?
-Slow due to postal system
-Post can get lost
What does FCA stand for?
Financial conduct authority
What does FOS stand for?
Financial Ombudsmen service
What does FSCS stand for?
financial services compensation scheme
What does FCA stand for?
office of fair trading
What is the purpose of financial conduct authority?
- makes sure customers are treated fairly
- ensures organisations focus on customers
What is the purpose of FOS?
- A customer can contact them if they have a complaint against their bank
- established by the Government and is free to use
What is the purpose of FSCS?
- pays compensation to a consumer of financial services if the financial services provider is unable to pay
- set up by parliament
What is the office of fair trading?
- a governmental organisation to regulate all markets to encourage healthy competition
Define a consumer credit law.
are laws passed by the UK government to enforce regulation of any firm offering credit to consumers eg. leasing, creedit cards ect.
Is a mortgage regulated by consumer credit Act?
No
What is Citizens advice?
Run by charities – offers advice on financial and non-financial issues e.g. debt, banking and pensions
what are the advantages of citizens advice?
Free
Face to face and online
Wide range covered
what are the disadvantages of citizens advice?
Limited information about topics
Limited availability of appointments
what are independent financial advisors?
Professionals who offer independent advice to their customers on their financial matters e.g. savings, mortgages, pensions etc
What are price comparison websites?
Websites that collate prices for similar goods and services in a certain industry e.g. car or house insurance
What are money advice services?
Government organisation that offers free financial advice
What are debt counsellors?
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
What are the advantages of independent financial advisors?
Professional advice offered
In-depth knowledge
What are the advantages of price comparison websites?
Available 24/7
Free
What are the advantages of money advice services?
Free service
Covers a wide range of services
What are the advantages of debt counsellors?
Professional advice
Regulated by FCA and FOS
What are the disadvantages of independent financial advisors?
Expensive
May be out of date/ biased
What are the disadvantages of price comparison websites?
May be out of date/ inaccurate
Does not include all businesses
What are the disadvantages of money advice services?
No physical service option
What are the disadvantages of debt counsellors?
Charge for services
Focus on debt only
What is individual voluntary arrangements bankruptcy?
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.
What are the advantages of the individual voluntary arrangements bankruptcy?
Helps manage debt repayment
Independent advice provided
What are the disadvantages of the individual voluntary arrangements bankruptcy?
Fees are charged for the service
