A2 - Methods of Payment Flashcards
Explain and evaluate use of cash.
It’s the physical money available.
+ Easy to budget & widely accepted
- Easy to steal or lose & can’t be used online
Explain and evaluate use of debit cards.
It’s a payment card that deducts money directly from a customer’s current account.
+ Can be used online & lower risk of theft
- May have minimum spend limits & could go into overdraft
Explain and evaluate use of credit cards.
It’s credit provided from a
bank/institution with a limit that’s repaid monthly.
+ Widely accepted & can be used online
- Interest charged if not paid in full & encourages overspending and debt
Explain and evaluate use of cheque.
It’s a written order to a bank to pay a stated amount from an individual’s account to another.
+ Good for large transactions & no need to carry large amounts of cash
- There can be time delay between writing cheque and it being cleared & errors can be made when writing it
Explain and evaluate use of electronic transfer.
It’s an electronic payment from one bank account to another.
+ Fast and free method of payment & payment is recorded
- Could transfer to the wrong person & not appropriate for purchases in person
Explain and evaluate use of direct debit.
It’s an instruction to your bank authorising automatic payments.
+ Quick and easy & good way to stay on top of bills
- Needs monitoring to ensure correct amounts are being collected
Explain and evaluate use of standing order.
It’s the set up of a regular, fixed payment from your bank account.
+ Easy to set up and cancel & same amount is paid each time
- Payments are taken regardless of customers bank balance which may result in going into overdraft
Explain and evaluate use of pre-paid cards.
It’s a plastic card you load money on instead of carrying cash.
+ Avoids overspending & if lost, it can’t be overdrawn
- May cost money to set up & not protected if lost
Explain and evaluate use of contactless cards.
It allows money to be transferred by touching the card on a contactless terminal.
+ Very popular, quick & safe
- Can only be used for small amounts & not available everywhere
Explain and evaluate use of charge cards.
It’s a credit card that you have to pay in full every month.
+ No need to carry cash & has additional rewards, discounts and benefits
- Full payment required each month & has annual fixed fee
Explain and evaluate use of store cards.
It’s a card issued by retail outlets so that customers can purchase their products on credit.
+ Short period of interest free credit & provides special offers/promotions for that store
- Can only be used in specified stores/places & can encourage debt on consumer goods
Explain and evaluate use of mobile banking.
Carrying out financial transactions using a mobile device.
+ Convenient, secure & 24/7
- Limited features compared to internet banking and banking in branch & need WiFi or service
Explain and evaluate use of Banker’s Automated Clearing Services (BACS).
Electronic system to make payments directly from one bank account to another.
+ Guarantees instant payment within 2 hours & no additional costs
- Limited amount in a single transaction & service not offered by all banks
Explain and evaluate Clearing House Automated Payment System (CHAPS).
Payments to UK accounts that are guaranteed to arrive on the day you make them.
+ No limit on the amount in a single transaction & same day transfer
- Fixed charge for the transaction
