Unit 3-Different ways to pay (A2) Flashcards
What is cash?
Notes and coins that come in varieties of value
Advantages of cash
-Accepted in every retail outlet
-making cash is very reliable
-helps with budgeting
-no technology required
Disadvantages of cash
-Can be lost or stolen
-Counterfeiting
-Only appropriate for certain purchases
-hard to trace
What is a debit card?
A bank issues debit cards for their customers to make purchases/cash withdrawals.
Advantages of debit cards
-No need to carry cash
-more secure
-traceable transactions
-protected purchases
-online shopping
Disadvantages of debit card
-retailers may not accept cards at all or small transactions
-Delays in appearing in transaction history may lead to overspending.
What is a credit card?
Credit cards are a way of borrowing money from a lender such as a bank.
Advantages of credit cards
-gives you more time to pay
- can be used for large purchases
-method for borrowing
Disadvantages of credit cards
-can encourage overspending/debt
-non-payment leads to poor credit scores
-credit limits
-high interest rates
What is a cheque?
A written order to a bank that moves money from one bank account to another.
Disadvantage of cheque
-Old fashioned
-not many retailers still accept them
-Take a long time to process
Advantages of a cheque?
-secure as only person named the cheque can cash/deposit it.
-Can write the exact amount so no change is given
What is electronic transfer?
Money is transferred directly between one bank account to another
Advantages of electronic transfer
-almost instantaneous
-keeps a record of payment
-no processing fees
-convenient for one-off transactions
Disadvantages of electronic transfer
-the transfer needs to be set up correctly or loss may occur
-Cannot be used as a payment method in retail outlets
What is direct debit ?
An agreement between a bank and a third party allowing them to withdraw funds on a set day every month.
Advantages of direct debit
-easy way to make regular payments
-easy to set up
-amount easily changed to match amount owed
Disadvantages of direct debit
-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.
What is standing orders?
An agreement between a bank and a third party to pay a fixed amount each month.
e.g. paying rent to a landlord
Advantages of standing orders
-Easy to complete a household budget as the amount does not change
-Easy to cancel
Disadvantages of standing orders
Payments are taken regardless of funds in bank account, which leads to being overdrawn
What is pre-paid credit cards?
Pre-paid credit cards allow you to spend online by loading a set amount of money onto a credit card.
Advantages of pre-paid credit cards?
-can be used for purchasing goods online
-secure
-can’t overspend as it has a set amount loaded onto it
Disadvantages pre-paid credit cards
-if the card is lost/stolen then you may lose the money loaded onto it
-Additional fees may be charged
What is contactless payment?
Contactless payment allows you to use your bank card/phone to pay for items under £100 instantly without entering your PIN.
Advantages of contactless card
-Fast and instant
-You have to enter your PIN occasionally for security
Disadvantages of contactless card
-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.
What is charge cards?
issued by financial institutions allowing customers to delay payment for goods and services but the balance must be cleared when a statement is issued.
Advantages of charge cards
-reduces the risk of debt
-can offer additional perks
-short period of credit
Disadvantages of charge cards
-often charges an annual fee
-balance must be paid in full each month
What are store cards?
Store cards are offered by an individual business and can only be used with that particular business.
Advantages of store cards
-allows customers to huy items on credit and spread the costs
-customers may be offered additional discounts
Disadvantage of store cards
-often have high interest rates
-can encourage overspending
-can only be used in the store that issues it
What is online banking?
Bank apps online (22 million people in the uk use banking apps)
Advantages of online banking
-easy and convenient for customers
-transactions are quick
-no need to visit a bank
-24/7 banking
-multi-layered security
Disadvantage of mobile banking
-mobile banking leads to many high street banks to close affecting vulnerable customers
what is BACS?
bankers automated clearing service
What is FACS?
faster payment service
Advantages of FACS and BACS?
-payment processed with 2 hours
-no fees
-can be done online
-in branch or over phone
Disdavantages of BACS and FPS?
-Not all banks offer faster payment
-payments take 3 days to clear and has a set limit
