Making Payments (LO3)

Question 1

Who might a bz need to pay? (stakeholders)

Answer 1

Employees
Utility companies
Travel companies
Suppliers
Hotels
Transport providers

Question 2

What are 5 common ways in which bzs can make payments?

Answer 2

Cheques
Debit cards
Digital and online such as paypal
Credit cards
Bank payments

Question 3

What is a cheque?

Answer 3

They are paper based form of payment available through banks. A bank or a building society would be responsible to pay money to your account

Question 4

Who gets to write a cheque?

Answer 4

Drawer

Question 5

Who receives a cheque?

Answer 5

Payee

Question 6

What are the advantages of cheques? (Payer)

Answer 6

No need to obtain cash - safer for large amounts
Can be sent through the post
Cheques can be stopped

Question 7

What are the disadvantages of cheques? (Payer)

Answer 7

Paper based can be lost
May need more than one signature (bz cheques)

Question 8

What are the advantages of cheques? (Payee)

Answer 8

No need to store large amounts of cash
Can be post dated to enable future payments

Question 9

What are the disadvantages of cheques? (Payee)

Answer 9

it can take 3-5 working days for funds to be received
Cheques can ‘bounce’ if the payer doesn’t have the money

Question 10

What is a debit card?

Answer 10

It is an electronic method of payment, in other words an electronic version of a cheque that allows customers to transfer funds from one bank to another. Not to mention if there are insufficient funds then transactions will be declined

Question 11

What are the advantages of debit cards? (Payer)

Answer 11

No need to obtain cash
Can be used online
Accepted in most places

Question 12

What are the disadvantages of debit cards? (Payer)

Answer 12

Fraud is an issue, as cards give direct access to account
Enough funds are required for payment to be authorised

Question 13

What are the advantages of debit cards? (Payee)

Answer 13

Payments can be received online
Once authorised payment is guaranteed

Question 14

What are the disadvantages of debit cards? (Payee)

Answer 14

Equipment is needed to process card payments
Fees are payable on transactions

Question 15

What are the advantages of digital payments? (payer)

Answer 15

Easy to use - only need to log in
No need to provide card details to lots of different sites or providers

Question 16

What are the disadvantages of digital payments? (Payer)

Answer 16

Accounts with sites such as paypal can be frozen
The value of virtual currency can change rapidly

Question 17

What are the advantages of digital payments? (Payee)

Answer 17

Easy to receive payments by adding a button to a website
Once authorised payment is guaranteed

Question 18

What are the disadvantages of digital payments? (Payee)

Answer 18

Fees are payable on transactions
Payments received in virtual currency can change in value e.g. bitcoin

Question 19

What is a credit card?

Answer 19

An electronic payment method of borrowing funds from a card provider

Question 20

What does it entail when using credit card?

Answer 20

The card provider pays for the purchases
The card provider adds purchases to the amount owned by the cardholder
A monthly statement is sent to the cardholder
A minimum amount will have to be repaid each month
Interest is charged on any amount not repaid

Question 21

What are the advantages of credit cards? (Payer)

Answer 21

Do not need the cash upfront
Can be used online
Provides additional consumer protection

Question 22

What are the disadvantages of credit cards? (Payer)

Answer 22

Interest is charged on the amount not paid off each month
Can lead to debt problems if not used sensibly

Question 23

What are the advantages of credit cards? (Payee)

Answer 23

Payments can be received online
Once authorised payment is guaranteed

Question 24

What are the disadvantages of credit cards? (Payee)

Answer 24

Equipment is needed to process card payments
Fees are payable on transactions

Question 25

What are 2 ways of bank payments are made of?

Answer 25

Paying-in slip: This is used to pay cash or cheques into a bank account. Once completed it can be presented, along with the cash/cheque to a bank. Electronic fund transfer@ Used to transfer funds from one bank account to another. There are 2 types which are direct debit (gives permission for withdrawals to be made from an account) and standing order (gives permission to a withdraw a specific amount on a regular basis e.g. monthly

Question 26

What are the advantages of bank payments? (Payer)

Answer 26

Transfer can be made quickly and easily No need to remember to make regular payments

Question 27

What are the disadvantages of bank payments? (Payer)

Answer 27

May forget payments and pay for services no longer used Money is still paid even if there are insufficient funds

Question 28

What are the advantages of bank payments? (Payee)

Answer 28

Regular payments can be received on time Flexibility to change amounts (direct debits)

Question 29

What are the disadvantages of bank payments? (Payee)

Answer 29

Payments can be charged-back if errors have been made May have to pay fees to collect bank payments