T4 Everyday Banking Flashcards
What are current accounts used for?
Everyday banking
- e.g. recieving payments
- storing money for short periods of time
- making payments
- accessing cash
What age for current accounts
- some are designed for people aged 11+
- others only available for 18+ as they allow you to apply for an overdraft
What do young people use current accounts for?
Everyday banking - store money + withdraw cash
Are current accounts free?
Some are but others people have to pay a fee because extra services are available with the account
Where are current accounts available?
- banks
- building societies
- retailers - e.g. Marks & Spencer, Tesco
What do all current accounts offer?
- Regular statements online or on paper to enable people to monitor their transactions
- other facilities vary from account to account
What are the different types of current accounts?
- standard current account
- packaged accounts
- basic bank accounts
- student accounts
- youth accounts
- premium accounts
What’s a basic bank account?
- suits people who wish to avoid borrowing (e.g. low incomes)
- usually offers debit card or a cash card but not an overdraft or cheque book - thereby limiting possibilities of getting into debt
Are basic bank accounts free?
- most are
- people with a history of fraud or bankruptcy may need to pay a set up charge and/or monthly service charge
How are basic current accounts operated?
- using cash cards
- or pre-paid cards - loaded with funds from account + used to make purchases anywhere
- most offer direct debit + standing orders to pay bills
- providers will not make these payments however if the account has insufficient funds
Why were basic bank accounts introduced?
- introduced in 2004 as part of the governments plans for financial inclusion - ensuring everyone has access to banking services
- people without bank accounts are disadvantaged - cannot pay by direct debit - therefore can’t use services that require regular electronic payments e.g. internet access, they pay higher energy costs because they use pre-paid meters
What are youth accounts?
- available for people aged under 18
- these current accounts don’t offer overdraft facilities because people need to be 18+ to enter into a contract to borrow money
What do youth accounts offer?
11- 15 age group - cash cards or debit cards
16-19 age group - cash cards, debit cards, standing orders and direct debits, cheque book, online banking, mobile banking, text alerts
Why are only 2% of current account youth ones?
- many young people use saving accounts to manage their money instead of current accounts
- people often get their first current account when they start work and their employer wants to pay them electronically
What do standard current accounts offer?
- receiving payments
- cash card or debit card
- direct debits
- standing orders
- overdrafts
- cheque books
- online banking
- mobile banking
- text alerts
Are standard current accounts free?
Yes - unless the account holder uses the overdraft facility or requests services that have a charge, such as another copy of their statement
Who do standard current accounts suit?
People who wish to:
- pay bills by direct debit
- manage their money using a variety of communication channels
- borrow money for a short period of time
What are student accounts?
Standard accounts tailored to the needs of students in higher education and recent graduates
Features of a student account
- low or no interest overdraft
- discounts on contents or travel insurance policies
- providers wish to attract students to their current accounts as some will be higher earners in the future
Is their interest on credit balances?
Sometimes
What are the conditions for current accounts with interest?
- minimum monthly payments
- keeping the account in credit
- banking online
- may also be fees for holding accounts
When is interest paid in these accounts?
Between certain minimum and maximum amounts
What are joint accounts?
Accounts held by two or more people
Who does joint accounts suit?
- people who share finances
- married couples
- people sharing rent
When is a joint account not suitable?
For people who have different priorities or attitudes towards managing money
How does a joint account work?
- account holders may draw up rules about how the account will be operated and who will be responsible for managing in it
- providers will need to know who can withdraw funds and if a signature is required from more than one of the account holders to make a withdrawal
- if joint accounts become overdrawn then all account holders are responsible for repaying the full amount
What are packaged accounts?
They offer account holders extra benefits for a months fee
What benefits do packaged accounts offer?
- mobile phone and travel insurance
- car breakdown cover
- discounts in stores
- subscriptions for media services
When are packaged accounts suitable?
when the costs of benefits a person will use are greater than the annual account fee
What are premier accounts?
- designed for wealthy customers
- offer a range of additional services
What’s an example of a service with premier accounts?
A personal banker to help account holders manage their finances and banking products
How do you become eligible for a premier account?
- account holders have to have a certain level of income and/or funds to save or invest
- e.g. earnings of 75,000 or more
How do you open an account?
- supply provider with proof of identity and address ( to prevent money laundering)
- there needs to be separate proof of identity and dress
What is money laundering?
criminals using accounts to hide the source of their funds (e.g. drug dealing) and to make payments in support of their activities
What happens if providers don’t follow the legal requirement?
Heavy fine from the FCA
What can be used to prove identity/ address?
- gas/electricty bills that are less than 3 months old
- council tax bill issued within current financial year
- driving licence issued in the UK
- current passport
- emplyer’s ID if the employer is known to the provider
- medical card
- pension book
- insurance certificate issued in the last 12 months
What can young people use to prove identity?
- birth or adoption certificates
- confirmation letter from school/college/university care institution or employer —> stating their name, address and details on their educational or employment status
- UCAS letter
How can people on benefits prove identity?
Entitlement letter issued by the Department for Work and Pensions (DWP), HM Revenue and Customs (HMRC) or a local authority
Why may providers refuse to open an account?
If provider thinks the applicant would not be a profitable customer
Why may people monitor transactions?
It’s important to check your current account to ensure have sufficient money to pay transactions that are due, that they are keeping up to their budget and no mistakes have been made
How can people monitor their transactions
Through statements that are provided online, on paper and via ATMs
How often can transactions be checked?
- statements are usually provided once a month for current accounts
- unless very few transactions are made in which case they would be provided less frequently
How do statements describe transactions
By using abbreviations and each provider can devise its own
What does DC stand for?
Direct credit
What does BGC stand for?
Bank giro credit
What is Bacs
Central government system used to process several different types of electronic payment, especially direct credit
How do cheques appear on statements?
The number of the cheque
What must be done when closing a current account?
- pay any fees and money they owe
- return their payment cards and cheque book
- people will need to tell the provider where to pay the balance on the account - by a cheque or a transfer to another account
Why may the provider delay closing the account?
- automated payments due
- cheques written on the account
Why may a provider close a current account?
If the customer no longer meets minimum deposit criteria and the provider must give at least two months notice
