Methods of payment

Question 1

cash

Answer 1

most traditional, can’t overspend but not suitable for larger purchases

Question 2

debit card

Answer 2

no interest rates and money comes straight out of bank, but must have money available in your account

Question 3

credit card

Answer 3

can make larger payments beforehand, but there are interest rates and credit score can be damaged

Question 4

cheque

Answer 4

paper transaction giving a bank permission to transfer payment from your account to another, very easy to commit fraud

Question 5

electronic transfer

Answer 5

online transfer of money from one account to another, instant and recorded time, but only suitable for friends and family, depends on phone security

Question 6

direct debit

Answer 6

permission given to the bank to make regular payments to a third party upon request, automatic so prevents charges from forgetting, but may lead to overdraft and charge daily interest

Question 7

standing order

Answer 7

permission given to the bank to make regular payments of a set amount to a third party upon request, but is between friends and family

Question 8

pre-paid cards

Answer 8

a cash balance is held on a card which then reduces each time a transaction takes place, doesn’t allow overspending and gives financial responsibility, but doesn’t leave room for unforeseen circumstances

Question 9

charge card

Answer 9

allows for purchases to be paid on a credit card but the total amount is automatically paid direct from a bank account, automatic so prevents interest from forgetting, but chance of overdraft from automatic payments

Question 10

store card

Answer 10

allows a customer to buy on credit in a particular store, can buy what you need and pay later, but is easy to go into debt and may get multiple cards for different stores- lose track of spending

Question 11

mobile banking

Answer 11

making transactions using a mobile phone or other portable device, easy access to financial data, but depends on battery power and security to phone

Question 12

banker’s automated clearing services (BACS)

Answer 12

direct transfer of money from one bank account to another, may take a few days but is used for larger payments

Question 13

faster payments services (FPS)

Answer 13

direct transfer of money from one bank account to another, guaranteed within two hours but may be quicker

Question 14

clearing house automated payment systems (CHAPS)

Answer 14

same day transfer of funds from one bank account to another of any account