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LIBF Unit 1 > T3 Payment Methods > Flashcards

T3 Payment Methods Flashcards

1
Q

How to compare methods of payment

A
  • how convenient for the the payer
  • which method the seller accepts
  • speed of transaction
  • safety
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2
Q

What is transaction need?

A

The need to make payments, with each payment being a seperate transaction

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3
Q

What is cash genuinely used for?

A
  • everyday, low value transactions
  • face to face situations
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4
Q

What % of transactions are cash in the uk?

A

30 %

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5
Q

Advantages of cash

A
  • convenient for payer (as long as they have enough notes and coins with them)
  • readily accepted by people selling goods or the service
  • instant
  • low risk at low values
  • allows people to budget
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6
Q

Disadvantages of cash

A
  • cannot pay by cash over the internet
  • transaction must be made regularly - e.g. paying rent or utility bills - easy to miss payments
  • less convenient
  • carrying large amounts of cash can be risky
  • some sellers prefer other payment methods
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7
Q

Why do sellers prefer not to be paid in cash?

A
  • seller has responsibility of looking after cash until it can be deposited into their bank account —> risk the money could be lost or stolen
  • larger retailers have to employ security services to transport money
  • suspicious of customers who pay for high value items in cash
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8
Q

What do you give to providers to transfer money electronically?

A

Instructions

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9
Q

What are mandates?

A
  • instructions given on paper or online by completing a form to set up a one off payment or regular payments from their account
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10
Q

Types of electronic payment

A
  • standing order
  • direct debits
  • online banking
  • faster payments
  • mobile banking
  • online banking services
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11
Q

What’s a standing order?

A
  • Instructions to pay the same amount of money to another account on a regular basis
  • standing orders can be set up and cancelled by giving instructions to the current account provider in writing, over the phone or online
  • can be cancelled anytime and costs nothing
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12
Q

What are direct debits?

A
  • Automatic payment set up for a current account
  • Giving permission to their provider to pay regular bills that an organisation will present for payment
  • payments can be for different amounts of money each time
  • can be set up and cancelled by giving instructions to provider in writing, over the phone or online + free of charge
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13
Q

How’s are direct debits protected?

A

By a guarantee that providers that accept instructions by direct debit agree to refund the account holder if an error is made with a transaction

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14
Q

What’s online banking?

A
  • account holders give instructions for account transactions via the internet
  • to access online banking, an account holder must first register for the service
  • complete an online form - set up passwords and pass numbers
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15
Q

What does online banking allow?

A
  • set up regular payments - standing orders and direct debits
  • one off transactions - paying organisations or individuals
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16
Q

What are faster payments?

A
  • an electronic payment service offered by all UK banks and building societies
  • prior to May 2008, electronic payments were made via Bacs - could take up to 3 business days to transfer money
  • Fast Payment services only takes up 2 hours
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17
Q

Is there a maximum value for Faster Payments?

A

Yes

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18
Q

What does CHAPS stand for?

A

Clearing House Automated Payment System

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19
Q

What is CHAPS?

A
  • same-day automated payment system used for very high value payments
  • to make transaction a form needs to be completed for the provider + there is a charge
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20
Q

What does CHAPS guarantee?

A
  • that the transaction is secure + payed into the recievers account the same day
21
Q

What’s mobile banking?

A
  • enables account holders to give payment instructions on their mobile phone using the internet
  • account holders download a mobile banking app from their provider that includes security measures
22
Q

What does mobile banking allow account holders to do?

A
  • check balances
  • pay in cheques digitally
  • set up direct debits + standing orders
  • transfer money between accounts
23
Q

Can you use faster payment service with mobile banking?

A

Yes - since 2014, using a service called Paym
- account holders must nominate the account to which Paym service will be linked and register their mobile number with their provider

24
Q

What are online payment services?

A
  • enable people to pay each other without exchanging current account details
  • e.g. PayPal - withdraws money from current account
25
Q

Why are online payment services safe?

A
  • sellers never see the buyer’s personal financial details
  • protects users from any unauthorised payments made from their account
26
Q

Advantages of online payment

A
  • fast, safe, convenient
  • most are free of charge (as long as account holder has enough money in current account to make transaction)
  • automated payments can be set up to make recurring transactions - bills are payed on time without further effort from account holder
27
Q

Disadvantages of electronic payments

A
  • online fraud + identity theft - account holders have to be careful to follow security measures + keep passwords and pass numbers safe
  • risk of account holders making mistakes - wrong payment amounts due to displaced decimal or wrong number for the account they are paying
28
Q

How can you reduce risk of fraud?

A

Check account statements - report suspicious transactions

29
Q

What is a cheque

A
  • a payment mechanism that enables an account holder to instruct their provider to pay a specific amount of money to a specific person or organisation
  • providers give current account holders preprinted cheque books
30
Q

What are cheques often used for?

A
  • to pay money to family + friends
  • to pay bills from tradespeople
31
Q

Advantages of using cheques

A
  • secure - money can only be paid into the account with the same name as the person
  • easy to carry + to use
32
Q

Disadvantages of using cheques

A
  • people or organisations can’t be certain they will receive the money immediately
  • providers can not honour cheques if person who wrote the cheque doesn’t have enough money in their current account to pay it - provider marks check as ‘unpaid’ —> check bouncing
  • cheque guarantee scheme was withdrawn in 2011
  • some businesses refuse to accept cheques - risk of cheque being returned as ‘unpaid’ + cost of processing cheques greater than the cost of processing payment card transactions
33
Q

What are Banker’s drafts?

A
  • look similar to cheques + process through the same system
  • however - signed by provider rather than individual
  • this means the payment is guaranteed
34
Q

What are Banker’s drafts used for?

A
  • used for paying large sums of money
  • money is transferred faster than a cheque
  • there is a charge
35
Q

What are payment cards?

A

Payment mechanism that enables account holders to give their provider instructions to pay money from an account

36
Q

What are cash cards?

A
  • Allows the withdrawal of cash from an account at a branch or ATM
  • they cannot be used face to face or over the internet
  • providers offer cash cards to under 18s or those on low incomes to enable them to access their cash easily
  • branded as Visa or Mastercard
37
Q

What are debit cards?

A
  • allow account holders to access cash from their accounts + also pay for goods in stores, over the internet, by telephone and by post
  • payments taken directly from the account immediately
38
Q

What does authorisation mean? (Debit cards)

A
  • The seller is guaranteed to receive the payment - sellers therefore encourage customers to use it
  • sellers have to pay their bank a small fee for accepting debit cards
39
Q

What’s cash back service?

A

Rewards program where customers can earn back a percentage of the money they spend while shopping - up to £50

40
Q

What are pre-payment cards?

A
  • Cardholders load the card with money and then use it to pay for goods and services
  • e.g. Oyster card for journeys on the London bus or tube system
41
Q

What’s a contactless card?

A
  • used for contactless payments of up to a specified limit per transaction
  • doesn’t require inserting card + entering pin
42
Q

Using debit cards abroad

A
  • transactions made in local currency - provider will use exchange rate to translate amount into pounds
  • cardholders may be charged a fee
  • debit cards can also be used in ATMs to withdraw cash in local currency
43
Q

Using pre-paid travel cards

A
  • loaded with money + used to make payments in other countries
  • can be used to withdraw cash from ATMs
  • can be topped with additional money
44
Q

Main two producers of travel cards?

A

Traveled and Caxton FX

45
Q

Why are pre-paid travel cards safe?

A

If the card is lost or stolen, the card can be blocked and the remaining balance is refunded

46
Q

What are travellers cheques?

A
  • pre printed cheques for set amounts of currency
  • when bought, you must sign the cheque twice so the seller can make sure the two signatures match before accepting the cheque
47
Q

What happens if a travellers cheque is lost or stolen?

A

The issuing company (e.g. American Express) will replace them

48
Q

How to get a traveller’s cheque?

A
  • show photographic identification when buying
  • prevents money laundering

LIBF Unit 1 (14 decks)

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