Unit 3-Different ways to pay (A2)

Question 1

What is cash?

Answer 1

Notes and coins that come in varieties of value

Question 2

Advantages of cash

Answer 2

-Accepted in every retail outlet

-making cash is very reliable

-helps with budgeting

-no technology required

Question 3

Disadvantages of cash

Answer 3

-Can be lost or stolen

-Counterfeiting

-Only appropriate for certain purchases

-hard to trace

Question 4

What is a debit card?

Answer 4

A bank issues debit cards for their customers to make purchases/cash withdrawals.

Question 5

Advantages of debit cards

Answer 5

-No need to carry cash

-more secure

-traceable transactions

-protected purchases

-online shopping

Question 6

Disadvantages of debit card

Answer 6

-retailers may not accept cards at all or small transactions

-Delays in appearing in transaction history may lead to overspending.

Question 7

What is a credit card?

Answer 7

Credit cards are a way of borrowing money from a lender such as a bank.

Question 8

Advantages of credit cards

Answer 8

-gives you more time to pay

• can be used for large purchases

-method for borrowing

Question 9

Disadvantages of credit cards

Answer 9

-can encourage overspending/debt

-non-payment leads to poor credit scores

-credit limits

-high interest rates

Question 10

What is a cheque?

Answer 10

A written order to a bank that moves money from one bank account to another.

Question 11

Disadvantage of cheque

Answer 11

-Old fashioned

-not many retailers still accept them

-Take a long time to process

Question 11

Advantages of a cheque?

Answer 11

-secure as only person named the cheque can cash/deposit it.

-Can write the exact amount so no change is given

Question 12

What is electronic transfer?

Answer 12

Money is transferred directly between one bank account to another

Question 13

Advantages of electronic transfer

Answer 13

-almost instantaneous

-keeps a record of payment

-no processing fees

-convenient for one-off transactions

Question 14

Disadvantages of electronic transfer

Answer 14

-the transfer needs to be set up correctly or loss may occur

-Cannot be used as a payment method in retail outlets

Question 15

What is direct debit ?

Answer 15

An agreement between a bank and a third party allowing them to withdraw funds on a set day every month.

Question 16

Advantages of direct debit

Answer 16

-easy way to make regular payments

-easy to set up

-amount easily changed to match amount owed

Question 17

Disadvantages of direct debit

Answer 17

-The payee has to claim back the money if the business accidentally takes too much

-fluctuations in accounts may be hard to budget

-The account holder must ensure they have enough funds in bank to avoid being overdrawn.

Question 18

What is standing orders?

Answer 18

An agreement between a bank and a third party to pay a fixed amount each month.

e.g. paying rent to a landlord

Question 19

Advantages of standing orders

Answer 19

-Easy to complete a household budget as the amount does not change

-Easy to cancel

Question 20

Disadvantages of standing orders

Answer 20

Payments are taken regardless of funds in bank account, which leads to being overdrawn

Question 21

What is pre-paid credit cards?

Answer 21

Pre-paid credit cards allow you to spend online by loading a set amount of money onto a credit card.

Question 22

Advantages of pre-paid credit cards?

Answer 22

-can be used for purchasing goods online

-secure

-can’t overspend as it has a set amount loaded onto it

Question 23

Disadvantages pre-paid credit cards

Answer 23

-if the card is lost/stolen then you may lose the money loaded onto it

-Additional fees may be charged

Question 24

What is contactless payment?

Answer 24

Contactless payment allows you to use your bank card/phone to pay for items under £100 instantly without entering your PIN.

Question 25

Advantages of contactless card

Answer 25

-Fast and instant

-You have to enter your PIN occasionally for security

Question 26

Disadvantages of contactless card

Answer 26

-if your card is stolen then your cards may be used to pay for items without using your pin

-transactions do not clear from your account instantly.

Question 27

What is charge cards?

Answer 27

issued by financial institutions allowing customers to delay payment for goods and services but the balance must be cleared when a statement is issued.

Question 28

Advantages of charge cards

Answer 28

-reduces the risk of debt

-can offer additional perks

-short period of credit

Question 29

Disadvantages of charge cards

Answer 29

-often charges an annual fee

-balance must be paid in full each month

Question 30

What are store cards?

Answer 30

Store cards are offered by an individual business and can only be used with that particular business.

Question 31

Advantages of store cards

Answer 31

-allows customers to huy items on credit and spread the costs

-customers may be offered additional discounts

Question 32

Disadvantage of store cards

Answer 32

-often have high interest rates

-can encourage overspending

-can only be used in the store that issues it

Question 33

What is online banking?

Answer 33

Bank apps online (22 million people in the uk use banking apps)

Question 34

Advantages of online banking

Answer 34

-easy and convenient for customers

-transactions are quick

-no need to visit a bank

-24/7 banking

-multi-layered security

Question 35

Disadvantage of mobile banking

Answer 35

-mobile banking leads to many high street banks to close affecting vulnerable customers

Question 36

what is BACS?

Answer 36

bankers automated clearing service

Question 37

What is FACS?

Answer 37

faster payment service

Question 38

Advantages of FACS and BACS?

Answer 38

-payment processed with 2 hours

-no fees

-can be done online

-in branch or over phone

Question 39

Disdavantages of BACS and FPS?

Answer 39

-Not all banks offer faster payment

-payments take 3 days to clear and has a set limit