Methods of payment

Question 1

Cash

Answer 1

Physical notes and coins, available in a variety of amounts.

Question 2

Debit card

Answer 2

Payment card that deducts money directly from a customers current account to pay for a purchase.

Question 3

Credit card

Answer 3

issued by financial institutions allowing customers to delay payment for goods and services.

Question 4

Cheque

Answer 4

a written order to a bank to pay a stated amount from an individual account to another.

Question 5

Electronic transfer

Answer 5

payment is transferred directly from one bank account to another.

Question 6

Direct debit

Answer 6

an agreement made with the bank allowing a third party to withdraw money from an account on a set day to pay for goods or services received.

Question 7

Standing order

Answer 7

agreement made with a bank to transfer a fixed sum of money to a third party account on a set date on a regular basis.

Question 8

Contactless

Answer 8

cards containing antennae allows money to be transferred when the card touches a contactless terminal.

Question 9

Prepaid card

Answer 9

money is uploaded onto a card with transactions then being withdrawn to reduce the balance.

Question 10

Charge card

Answer 10

issued by a financial institution allowing customers to delay payments for a short period of time, balance must be paid off in full when a statement is issued.

Question 11

Store card

Answer 11

issued by a retail outlet so that customers can delay payments for goods and services, similar to a credit card but only used in store where it was issued.

Question 12

Mobile banking

Answer 12

carrying out financial transactions using a mobile device such as phones or tablets

Question 13

BACS(bankers automated clearing service)

Answer 13

an electronic system to make payments directly from one bank account to another

Question 14

CHAPS(clearing house automated payment system)

Answer 14

a system that allows the transfer of payments.

Question 15

Cash pro’s and con’s

Answer 15

Adv - widely accepted, makes budgeting easier, consumers feel confident when using.
Disadv - can be lost or stolen, threat of counterfeit, can not be used online

Question 16

Debit card pro’s and con’s

Answer 16

Adv - widely accepted, suitable for online transactions, secure method of payment with low risk of theft.
Disadv - not accepted for small transaction, can encourage overspending.

Question 17

Credit card pro’s and con’s

Answer 17

Adv - helps with unforeseen purchases, widely accepted, gives free access to money you don’t have
Disadv - charged high rates of interest, encourages customer to overspend and get into debt, limit set on amount of credit given

Question 18

Cheque pro’s and con’s

Answer 18

Adv - low risk as cheque can only be cashed by the named payee, widely accepted for face-to-face and postal transactions.
Disadv - expensive if cheque bounces, time delay between writing the cheque and it being cashed could cause a consumer to go overdrawn, viewed as old fashioned

Question 19

Electronic transfer pro’s and con’s

Answer 19

Adv - almost instantaneous, no additional costs, easy to use for one-off transactions.
Disadv - risk of loss if transfer is incorrectly set up, cant use face-to face

Question 20

Direct debit pro’s and con’s

Answer 20

Adv - easy way to make regular payments, quick and easy to set up, exact amount paid
Disadv - if payer makes a mistake then payee needs to chase up, payer determines the amount each time making it difficult for the payee to plan and budget

Question 21

Standing order pro’s and con’s

Answer 21

Adv - easy to set up and cancel, sae amount paid each time, no need to remember to make regular standard payments.
Disadv - payments taken regardless of customer balance, payments will continue to be made unless cancelled.

Question 22

Contactless pro’s and con’s

Answer 22

Adv - popular method, secure method
Disadv - only accepted for relatively small transactions, still not widely accepted, card needs to be stopped if lost

Question 23

pre paid card pro’s and con’s

Answer 23

Adv - helps overspending as set a budget, if lost or stolen the loss is limited to the remaining balance.
Disadv - no protection if lost, may require an initial fee to set up the card

Question 24

Charge card pro’s and con’s

Answer 24

Adv - avoids carrying cash allows a short period of credit, reduces risk of running up debts
Disadv - must be paid of in full each month often an annual fixed fee is applied.

Question 25

Store card pro’s and con’s

Answer 25

Adv - short period of interest free credit, often offer loyalty schemes, discounts and special promotions or privileges.
Disadv - only accepted in the issuing state, interest is paid on outstanding balance, encourages overspending.

Question 26

Mobile banking pro’s and con’s

Answer 26

Adv - convenient, easy to use and secure
Disadv - features are limited so does not offer all the functionality of internet banking

Question 27

BACS pro’s and con’s

Answer 27

Adv - fast payments, no additional costs, easily accessed.
Disadv - payment limits may be set, faster payments is not offered by all banks or branches and customers may have to default to BACS.

Question 28

CHAPS pro’s and con’s

Answer 28

Adv - transfers are made the same day, no limit on amounts
Disadv - fixed charge per transactions regardless of amount