Unit 3 (Personal and Business Finance) Flashcards
What are the 4 functions of money
- Unit of Account
- Means of Exchange
- Store of Value
- Legal Tender
What is Unit of Account
Money serves as the common bases of comparisons that people use to present price and record debts
What is Mean of Exchange
Where we uses notes and coins rather than barter as a medium of exchange
What problems does money as a medium of exchange avoid
Avoids the problems of barter such as double coincidence of wants
What is a double coincidence of wants
A situation where both parties hold an item needed by the other to fulfill their demand.
What is a store of value
That money holds a value
What is Legal Tender
That money is accepted to buy goods and services
What does legal tender enable?
As money is an accepted medium of exchange,it enables credit to be offered so payment can take place at a future date
What are factors that affect the role of money
- Personal attitudes towards money
- Culture (including religious and ethical beliefs)
- Life Events
- External Influences
- Interest Rates
What is a credit limit?
The maximum amount of money that can be borrowed
What is APR?
Annual Percentage Rates which is the cost paid per year to borrow money expressed as a percentage
What is interest?
The additional fee that will need to be paid on top of any money borrowed via credit card
What is a transfer fee?
This is the amount of interest paid on top of the amount of money that is transferred to another credit card
What is AER?
Annual Equivalent Rate, This is the interest which you will be paid by the bank by saving
What is a current account?
A current account is a type of bank account most people use for day-to-day personal finances
Types of current account
- Standard
- Basic
- Premium
- Student
Advantages of a standard account
- Widely Available
- Overdraft facility
- Range of Services
Disadvantages of a standard account
- Limited additional benefits
- Charges on overdraft
- Late fees for overdue payments
Advantages of a premium account
- Range of services
- Additional benefits
- Ease of controlling finances
Disadvantages of a premium account
- Charges additional fees
- Generic rather than tailored to the individual so some of the added benefits may be useless
Advantages of a basic account
Disadvantages of a basic account
Advantages of a student account
Disadvantages of a student account
Types of car purchase option
- Pay outright
- Car Finance
- Part exchange
Types of car payment plans
- Hire purchase
- Payment control plan
What is a hire purchase?
A monthly payment plan with a deposit which after the last installment of the payment, the car is yours
What is a payment control plan?
A monthly payment plan (low cost) with a deposit which after the last installment of the payment, you can pay a balloon payment to buy the car
What is car finance?
A loan to pay for PCP agreement over 36 to 60 months
What is an overdraft?
An overdraft lets you borrow money through your current account by taking out more money than you have in the account
Advantages of an overdraft
- Only pay for the money borrowed
- Quick and easy to arrange
- No charge for paying off the overdraft
- Only borrowed when required allowing for flexibility
Disadvantages of an overdraft
- The bank can call it in at anytime
What is a personal loan?
A set amount of money provided to an individual or couple, for a specific purpose, to be repaid with interest, over a set period of time and may be secured against an asset
What is a mortgage?
A long-term loan to fund the purchase of an expensive item that will hold value over a long time
What is a payday loan?
A short-term loan, for a relatively small amount of money, to be repaid, upon receipt of the lenders next wage
What is investment?
When money is put into an asset to generate profit
What does an ISA stands
Individual Saving Account
