Payment Methods Flashcards
When do people tend to use cash?
Everyday, low value transactions
Face to face with seller
Give advantages of using cash
Convenient
Readily accepted by sellers
Instant
Low risk at low values
Why might people prefer to pay by cash?
Help them budget / control amount they spend
Know what can be afforded
Give disadvantages of using cash
- Cannot buy things over the Internet / mail / telephone
- Inconvenient to pay bills by cash because it means you must visit e.g. Landlord / payment point
- Inconvenient to pay for things in advanced e.g. Tickets
- Risky to carry large amounts of cash
- Some sellers prefer other payment methods
What is the most commonly used bank account for making and receiving payments?
Current accounts
How many current accounts are there in the U.K.?
76 million
What percentage of adults are estimated to have at least one current account?
94%
What are the key payment features of current accounts?
Ability to give provider instructions to transfer money electronically - give ph on paper / phone / online
These can be one off or regular
Give the different types of electronic payment
Standing orders Direct debits Online banking Faster payments CHAPS Mobile banking Online payment services
What is a standing order?
An instruction to pay the same amount of money to another account on a regular basis.
They can be cancelled at any time.
They cost nothing - as long as there is enough money in the current account
What are direct debits?
Permission to the provider to pay the regular bills that an organisation will present for payment.
Payments can be for different amounts each time.
They can be cancelled at any time.
They cost nothing.
What is online banking?
Online banking enables account holders to give instructions for account transactions via the internet .
Regular payments can be set up (e.g. Standing orders/direct debits)
As well as one off transfers
What are Faster Payments?
An electronic payment service offered by all U.K. banks and building societies.
Ensures payments arrive in the destination bank within two hours
Before Faster Payments service, what was the payment system used to make electronic payments?
Bacs - would take up to three working days for transactions
What is CHAPS?
Clearing House Automated Payment System
Same day automated payment system used for very high value payments.
What is mobile banking?
Enables account holders to give payment instructions on their mobile phones using the internet.
Requires a mobile app.
Can use Faster Payments Service via mobile using service called Paym
What are online payment services?
Eg PayPal
Enable people to pay each other without exchanging current account details - debit / credit card
Give advantages of electronic payments
Fast
Safe
Convenient
Most are free of charge as long as holder has enough money in their account
Automated payments can be set up -> bills paid on time
Give disadvantages of electronic payments
Security -> online fraud / identity theft
Risk that account holder will make a mistake e.g. Wrong number input = wrong amount / pay wrong person
What is a cheque?
Payment mechanism that enables account holder to instruct their provider to pay a specific amount of money to a specific person / organisation
Give advantages of using cheques
Secure
Easy to carry
Easy to use
Most common method to receive payments for some small businesses
Give disadvantages of using cheques
- Transaction may take up to 6 days
- Payments cannot be made if not enough money in current account -> cheque bouncing
- Some businesses refuse to accept cheques
What is cheque bouncing?
When there is insufficient current account balance for the cheque transaction to be made.
Provider marks the cheque ‘unpaid’ and returns it to the person who was expecting to receive the payment
Why is the use of cheques less common nowadays?
Due to disadvantages of cheques and advantages of other payment methods
