Unit 1 Topic 4

Question 1

What is AER?

Answer 1

Annual equivalent rate is the interest that will be earned on the money in one year and takes into account how often the provider pays the interest, the effect of compounding the interest and any fees and charges.

Question 2

What is a basic bank account?

Answer 2

A current account that allows people to store their money as an electronic balance and make payments by direct debit, standing order, prepaid cash card or by withdrawing cash. There is no debit card, cheque book or overdraft facility with this type of account.

Question 3

What is a budget surplus?

Answer 3

A sun of money available once all the essential expenditure in a given period has been made.

Question 4

What is the HMRC?

Answer 4

Her Majesty’s Revenue and Customs - the organisation that collects taxes on behalf of the government.

Question 5

What is interest?

Answer 5

Money either paid to an account holder by the provider, or charged to the account holder by the provider. Interest is paid on savings accounts and some current accounts and charged on borrowing eg an overdraft. Each provider decides the rate of interest it will pay of charge depending on the type of account and,in some cases, the credit history of the individual account holder.

Question 6

What is money laundering?

Answer 6

The process of making ‘dirty’ money (money gained from criminal activities) ‘clean’; in other words making it look as thought it has been acquired legitimately.

Question 7

What is the office of fair trading? When was it abolished? Who were their responsibilities shared between?’

Answer 7

The government department that monitored how businesses compete with each other. It was abolished in 2014 and its responsibilities shared between the Financial Conduct Authority and the Competition and Markets Authority.

Question 8

What is a packaged account?

Answer 8

A current account that offers extra benefits such as travel insurance, for which the account holder pays a monthly fee.

Question 9

What is a premier account?

Answer 9

A current account that offers additional benefits, such as a personal banker, for wealthy customers with an income or savings above a certain level.

Question 10

What is a statement?

Answer 10

A record of the transactions on an account, issued at regular intervals such as monthly or quarterly. The statement indicates whether a debit or credit to the account was made by cheque, withdrawal from an ATM, direct debit, etc.

Question 11

What is a student account?

Answer 11

A current account designated for students in higher education that charges low interest or no interest on overdrafts, and offers other benefits such as low-cost contents or travel insurance.

Question 12

What is a youth account?

Answer 12

A current account designed for people under 18; no overdraft facility is provided as banks do not usually allow under-18s to borrow.

Question 13

Name the four main purposes of a current account

Answer 13

Receiving payments
Storing money for short periods of time
Making payments
Accessing cash

Question 14

Name and explain the seven main types of current account

Answer 14

Standard : full range of payment methods

Packaged account : charges a fee for services inside the account (insurance)

Basic account : debit/cash card and no overdraft

Student account : Interest free overdraft

Premium account : only for wealthy customers

Youth account : given to customers under 18 years old
may have additional security features controlled by an adult
no overdraft

Joint account : allows two or more people to receive payments, like wages, benefits or pensions

Question 15

What two things must be produced before a current account can be opened?

Answer 15

Proof of identity
Proof of address

Question 16

What does BBA stand for?

Answer 16

the British Bankers Association

Question 17

What are five items that are acceptable proof of identity or address?

Answer 17

gas/electricity bills
council tax bills
driving licence
passports
pension

Question 18

What is the most effective way of monitoring a current account?

Answer 18

by looking at the statements provided every month; these will include deposits, withdrawals, debits and fees, along with your starting and ending balances for the statement period.

Question 19

What does DCD stand for?

Answer 19

Duel credit deposit

Question 20

What is a duel credit deposit? What does it allow a bank customer to do?

Answer 20

a financial instrument structured to help a depositor take advantage of relative differences in two currencies.

allows a bank customer to make a deposit in one currency and withdraw the money in a different currency if it is advantageous to do so.

Question 21

What does DD stand for?

Answer 21

Direct debit

Question 22

what does SO stand for?

Answer 22

Standing order

Question 23

Name one benefit of a basic account

Answer 23

prevents debt because providers will generally not pay transactions unless enough money is present.

Question 24

When is a document a certified copy?

Answer 24

a document is a certified copy when it has been signed and dated by a professional.

Question 25

What does a certified copy do?

Answer 25

confirms that a document is a true copy of the original.

Question 26

Name one benefit of a current account

Answer 26

allows customers to pay bills, receive their salaries, benefits, pensions, etc.

Question 27

Name one benefit of direct debit

Answer 27

eliminates late payments.

Question 28

Name one benefit of a joint account

Answer 28

gives customers equal access to an account, making it easier to plan/pay for expenses.

Question 29

Name one benefit of an overdraft

Answer 29

flexible: you can only borrow what you need, may make it cheaper than a loan.

Question 30

Name one benefit of a packaged account

Answer 30

provides customers with car breakdown cover, home insurance, etc.

Question 31

Name one benefit of a premier account

Answer 31

provides customers with exclusive rates on mortgages.

Question 32

Name one benefit of a standard account

Answer 32

provides customers with a debit card.

Question 33

Name one benefit of setting up a standing order

Answer 33

they’re free/very cheap to set up and maintain.

Question 34

Name one benefit of a statement

Answer 34

allows customers to see how much, when and where they spent money.

Question 35

Name one benefit of a student account

Answer 35

charges low interest/no interest on overdrafts.

Question 36

What is a text alert?

Answer 36

an automatic alert sent to an account holder’s mobile by banks when funds are spent or deposited.

Question 37

Name one benefit of a text alert

Answer 37

allows customers to track and be immediately notified of their spending.

Question 38

Name one benefit of a youth account

Answer 38

teaches financial responsibility to children/ young adults.

Question 39

Is it necessary for people who wish to close their current account to give a reason for doing so?

Answer 39

no - although most providers will ask for marketing research purposes.