Topic 3 - Payment Methods Flashcards
What are advantages of cash?
Cash is readily acceptable, low risk at low values, and is convenient for the payer as long as they have enough notes and coins with them.
What are disadvantages of cash?
The transaction is not made face-to-face with seller, you can’t order something online with cash it has to be an electronical payment. The transaction must be made on the same or similar dates every month, for example paying rent or utility bills it would be inconvenient to pay with cash as you’d have to personally go to the landlords house or utility company, so its easier to make the payments online.
What is a standing order?
Standing orders are instructions to pay the same amount of money to another account on a regular basis. For example, you can pay your rent into your landlords bank account on the 5th of every month.
They can be cancelled by giving instructions to the current account provider in writing, over the phone or online.
What is a direct debit?
Direct debits can be set up in current accounts like standing orders, but the payments can be made in different amounts each month. Current account owners give the bank permission to give the payment information to the provider to pay the regular bills organisations will prevent for payment.
What is online banking?
Online banking enables account holders to give instructions for account transactions via the internet. You can set up standing orders, direct debits and one-off transfer payments between organisations and individuals quickly and efficiently.
What is the ‘Faster Payments’ system?
Faster Payments is an electronic payment service offered by all UK banks and building societies as a way of transferring money within two hours of the provider receiving instructions.
What is the ‘CHAPS’ system?
CHAPS (Clearing House Automated Payment System) is a same-day automated payment system used for very high value payments. For example, you can pay £150,000 for a house payment for a small fee to make sure large amounts of money securely the same day to ensure you receive the house.
What are online payment services?
Online payment services such as PayPal, enable people to pay each other without exchanging current account details, so it is very secure. You can instruct PayPal to make payments and PayPal will withdraw the money from the current account. Sellers never see the payee’s billing information.
What are advantages of electronic payments?
They are fast, save and convenient to make. The majority of them are free of charge as long as the account holder has enough money in their current account to pay the transaction, which ensures bills are paid on time without effort from the account holder.
What are disadvantages of electronic payments?
The main disadvantages of electronic payments is security. Online fraud and identity theft mean that account holders have to be very careful to follow security procedures and keep their passwords and pass numbers safe.
What is a banker’s draft?
A bankers draft look similar to cheques and are processed through the clearing system, however the difference is they are signed by the provider rather than an individual, this means payment is guaranteed. These are normally used for higher amounts.
What is a ‘cash card’
A cash card allows people to withdraw cash from their account at a branch or using an ATM. They cannot be used to pay sellers in face to face situations, over the internet or on the phone. These are targeted at under 18s or those on low income sources.
What is a debit card?
A debit card allows account holders to access cash from their accounts and also to pay for goods in store, over the internet. by telephone and by post. Payment is made immediately.
What is a ‘pre-payment’ card?
A pre-payment card (e.g. An oyster card) are like electronic purchases. Cardholders load the card with money and then use it to pay for goods or services. For example, you can use a pre-payment card such as an oyster card to insert cash or debit card into the payment machine and the money is added to the Oyster Card which you can use when taking the London Bus or tube.
Where can debit cards be used abroad?
When using debit cards abroad they can be used in stores, hotels, restaurants etc, that display the logo of the debit card provider (Visa/Mastercard). Transactions will be made in the local currency and will use an exchange rate to translate this amount into pounds (there may be a fee).
