Methods of payment Flashcards Preview

BTEC Business - Finance > Methods of payment > Flashcards

Flashcards in Methods of payment Deck (27)
Loading flashcards...
1
Q

What is cash?

A

Notes and coins used to complete transactions immediately

2
Q

Negatives and positives of cash

A

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
Q

What is debit card?

A

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

4
Q

Positives and negatives of debit card

A

Advantages

  • No need to carry cash
  • Widely accepted
  • Suitable for online transactions

Negatives
- Not accepted or appropriate for small transactions

5
Q

What is a credit card?

A

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

6
Q

Positives and negatives of credit card

A

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
Q

What is a cheque?

A

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
Q

Positives and negatives of cheque

A

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
Q

What is electronic transfer?

A

Payment is transferred directly from one bank account to another

10
Q

Positives and negatives of electronic transfer

A

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
Q

What is direct debit?

A

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
Q

Positives and negatives of direct debit

A

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
Q

What is standing order?

A

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
Q

Positives and negatives of standing order

A

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
Q

What is a pre-paid card?

A

Money is uploaded onto a card with transactions then being withdrawn to reduce the balance.

16
Q

Positives and negatives of pre-paid card

A

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
Q

What is a contactless card?

A

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

18
Q

Positives and negatives of contactless card

A

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
Q

What is a charge card?

A

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
Q

What is a store card?

A

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
Q

Positives and negatives of store card

A

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
Q

What is mobile banking?

A

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

23
Q

Positives and negatives of mobile banking

A

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
Q

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

A

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

25
Q

Positives and negatives of BACS

A

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
Q

What is Clearing House Automated Payment Systems (CHAPS)

A

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

27
Q

Positives and negatives of CHAPS

A

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.