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BTEC Business - Finance > Methods of payment > Flashcards

Flashcards in Methods of payment Deck (27):
1

What is cash?

Notes and coins used to complete transactions immediately

2

Negatives and positives of cash

Positives
- Convenient
- Widely accepted form
- Customers feel confident when using it

Negatives
- Can be lost or stolen
-Only appropriate on purchases up to a certain amount
- Can't be used online

3

What is debit card?

Issued by banks with payments for goods and services being deducted directly from a current account.

4

Positives and negatives of debit card

Advantages
- No need to carry cash
- Widely accepted
- Suitable for online transactions

Negatives
- Not accepted or appropriate for small transactions

5

What is a credit card?

Issued by financial institutions allowing customers to delay payments for goods and services

6

Positives and negatives of credit card

Advantages
- Most cards are widely accepted
- Suitable for online transactions
- Offers a degree of protection on purchases

Negatives
- Interest is charged on cash withdrawls
- Can encourage a customer to overspend and get into debt

7

What is a cheque?

A written order to a bank to make a payment for a specific amount of money from one person's account to another account.

8

Positives and negatives of cheque

Positives
- Widely accepted for face to face and postal transactions
- No need to provide change as can be written for an exact amount

Negatives
- Viewed as old fashioned
- Easy for the consumer to make errors when writing the cheque which will create problems for both the consumer and the recipient.

9

What is electronic transfer?

Payment is transferred directly from one bank account to another

10

Positives and negatives of electronic transfer

Positives
- Almost done immediately
- No additional costs incurred

Negatives
- Risk of loss if the transfer is incorrectly set up.
- Not appropriate for face to face transactions

11

What is direct debit?

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

12

Positives and negatives of direct debit

Positives
- Easy both to set up and to cancel
- An easy way to make regular payments

Negatives
- If the payer makes a mistake and takes too much it is the payee's responsibility to claim back the money

13

What is standing order?

An 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 e.g pay £30 for a phone contract every month.

14

Positives and negatives of standing order

Positives
- The same amount is paid each time making it easier for the payee to plan and budget
- Easy both to set up and to cancel

Negatives
- Payments are taken regardless of the customer's balance which could lead to the unplanned use of an overdraft facility

15

What is a pre-paid card?

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

16

Positives and negatives of pre-paid card

Positives
- Can set a budget in advance to avoid overspending
- If lost or stolen the loss is limited to the remaining balance

Negatives
- No protection if lost
- Sometimes requires an initial fee to purchase or set up the card e.g Oyster card

17

What is a contactless card?

Cards containing antennae allow money to be transferred when the card touches a contactless terminal

18

Positives and negatives of contactless card

Positives
- Gaining in popularity
- Secure method of making payments

Negatives
- Often only accepted for relatively small transactions
- Still not widely accepted as seen as new technology

19

What is a charge card?

Issued by financial institutions allowing customers to delay payments for goods and services for a short period of time; the balance must be paid off full when a statement is issued.

20

What is a store card?

Issued by a retail outlet so that customers can delay payments for goods and services (similar to a credit card but only accepted by stores specified)

21

Positives and negatives of store card

Positives
- Often offer loyalty schemes, discounts and special promotions or privileges.
- Allows a short period of credit that is interest free e.g one month

Negatives
- Only accepted in issuing store or linked associations
- Interest is paid on outstanding balances.

22

What is mobile banking?

The ability to carry out financial transactions using mobile devices such as phone or tablets.

23

Positives and negatives of mobile banking

Positives
- Convenient as can be used at any time and place
- Secure

Negatives
- Features are still limited and hence mobile banking does not offer all of the functionality of internet banking

24

What is Banker's Automated Clearing Service (BACS) Faster Payment?

A system that allows the transfer of payments directly from one bank account to another.

25

Positives and negatives of BACS

Positives
- Faster payment allows almost instant transfers that are guaranteed within 2 hours
- No additional costs

Negatives
- Faster payment is not offered by all banks or branches and the customer may therefore have to default to BACs which can take three days to transfer payments.

26

What is Clearing House Automated Payment Systems (CHAPS)

A system that allows the transfer of payments directly from one bank account to another.

27

Positives and negatives of CHAPS

Positives
- Transfers can be made the same day assuming instructions are received prior to a set time e.g 2pm at Barclays

Negatives
- Normally, there is a fixed charge per transaction regardless of the amount transferred.