T4 Everyday Banking

Question 1

What are current accounts used for?

Answer 1

Everyday banking
- e.g. recieving payments
- storing money for short periods of time
- making payments
- accessing cash

Question 2

What age for current accounts

Answer 2

• some are designed for people aged 11+
• others only available for 18+ as they allow you to apply for an overdraft

Question 3

What do young people use current accounts for?

Answer 3

Everyday banking - store money + withdraw cash

Question 4

Are current accounts free?

Answer 4

Some are but others people have to pay a fee because extra services are available with the account

Question 5

Where are current accounts available?

Answer 5

• banks
• building societies
• retailers - e.g. Marks & Spencer, Tesco

Question 6

What do all current accounts offer?

Answer 6

• Regular statements online or on paper to enable people to monitor their transactions
• other facilities vary from account to account

Question 7

What are the different types of current accounts?

Answer 7

• standard current account
• packaged accounts
• basic bank accounts
• student accounts
• youth accounts
• premium accounts

Question 8

What’s a basic bank account?

Answer 8

• suits people who wish to avoid borrowing (e.g. low incomes)
• usually offers debit card or a cash card but not an overdraft or cheque book - thereby limiting possibilities of getting into debt

Question 9

Are basic bank accounts free?

Answer 9

• most are
• people with a history of fraud or bankruptcy may need to pay a set up charge and/or monthly service charge

Question 10

How are basic current accounts operated?

Answer 10

• using cash cards
• or pre-paid cards - loaded with funds from account + used to make purchases anywhere
• most offer direct debit + standing orders to pay bills
• providers will not make these payments however if the account has insufficient funds

Question 11

Why were basic bank accounts introduced?

Answer 11

• introduced in 2004 as part of the governments plans for financial inclusion - ensuring everyone has access to banking services
• people without bank accounts are disadvantaged - cannot pay by direct debit - therefore can’t use services that require regular electronic payments e.g. internet access, they pay higher energy costs because they use pre-paid meters

Question 12

What are youth accounts?

Answer 12

• available for people aged under 18
• these current accounts don’t offer overdraft facilities because people need to be 18+ to enter into a contract to borrow money

Question 13

What do youth accounts offer?

Answer 13

11- 15 age group - cash cards or debit cards

16-19 age group - cash cards, debit cards, standing orders and direct debits, cheque book, online banking, mobile banking, text alerts

Question 14

Why are only 2% of current account youth ones?

Answer 14

• many young people use saving accounts to manage their money instead of current accounts
• people often get their first current account when they start work and their employer wants to pay them electronically

Question 15

What do standard current accounts offer?

Answer 15

• receiving payments
• cash card or debit card
• direct debits
• standing orders
• overdrafts
• cheque books
• online banking
• mobile banking
• text alerts

Question 16

Are standard current accounts free?

Answer 16

Yes - unless the account holder uses the overdraft facility or requests services that have a charge, such as another copy of their statement

Question 17

Who do standard current accounts suit?

Answer 17

People who wish to:
- pay bills by direct debit
- manage their money using a variety of communication channels
- borrow money for a short period of time

Question 18

What are student accounts?

Answer 18

Standard accounts tailored to the needs of students in higher education and recent graduates

Question 19

Features of a student account

Answer 19

• low or no interest overdraft
• discounts on contents or travel insurance policies
• providers wish to attract students to their current accounts as some will be higher earners in the future

Question 20

Is their interest on credit balances?

Answer 20

Sometimes

Question 21

What are the conditions for current accounts with interest?

Answer 21

• minimum monthly payments
• keeping the account in credit
• banking online
• may also be fees for holding accounts

Question 22

When is interest paid in these accounts?

Answer 22

Between certain minimum and maximum amounts

Question 23

What are joint accounts?

Answer 23

Accounts held by two or more people

Question 24

Who does joint accounts suit?

Answer 24

• people who share finances
• married couples
• people sharing rent

Question 25

When is a joint account not suitable?

Answer 25

For people who have different priorities or attitudes towards managing money

Question 26

How does a joint account work?

Answer 26

- account holders may draw up rules about how the account will be operated and who will be responsible for managing in it - providers will need to know who can withdraw funds and if a signature is required from more than one of the account holders to make a withdrawal - if joint accounts become overdrawn then all account holders are responsible for repaying the full amount

Question 27

What are packaged accounts?

Answer 27

They offer account holders extra benefits for a months fee

Question 28

What benefits do packaged accounts offer?

Answer 28

- mobile phone and travel insurance - car breakdown cover - discounts in stores - subscriptions for media services

Question 29

When are packaged accounts suitable?

Answer 29

when the costs of benefits a person will use are greater than the annual account fee

Question 30

What are premier accounts?

Answer 30

- designed for wealthy customers - offer a range of additional services

Question 31

What’s an example of a service with premier accounts?

Answer 31

A personal banker to help account holders manage their finances and banking products

Question 32

How do you become eligible for a premier account?

Answer 32

- account holders have to have a certain level of income and/or funds to save or invest - e.g. earnings of 75,000 or more

Question 33

How do you open an account?

Answer 33

- supply provider with proof of identity and address ( to prevent money laundering) - there needs to be separate proof of identity and dress

Question 34

What is money laundering?

Answer 34

criminals using accounts to hide the source of their funds (e.g. drug dealing) and to make payments in support of their activities

Question 35

What happens if providers don’t follow the legal requirement?

Answer 35

Heavy fine from the FCA

Question 36

What can be used to prove identity/ address?

Answer 36

- gas/electricty bills that are less than 3 months old - council tax bill issued within current financial year - driving licence issued in the UK - current passport - emplyer’s ID if the employer is known to the provider - medical card - pension book - insurance certificate issued in the last 12 months

Question 37

What can young people use to prove identity?

Answer 37

- birth or adoption certificates - confirmation letter from school/college/university care institution or employer —> stating their name, address and details on their educational or employment status - UCAS letter

Question 38

How can people on benefits prove identity?

Answer 38

Entitlement letter issued by the Department for Work and Pensions (DWP), HM Revenue and Customs (HMRC) or a local authority

Question 39

Why may providers refuse to open an account?

Answer 39

If provider thinks the applicant would not be a profitable customer

Question 40

Why may people monitor transactions?

Answer 40

It’s important to check your current account to ensure have sufficient money to pay transactions that are due, that they are keeping up to their budget and no mistakes have been made

Question 41

How can people monitor their transactions

Answer 41

Through statements that are provided online, on paper and via ATMs

Question 42

How often can transactions be checked?

Answer 42

- statements are usually provided once a month for current accounts - unless very few transactions are made in which case they would be provided less frequently

Question 43

How do statements describe transactions

Answer 43

By using abbreviations and each provider can devise its own

Question 44

What does DC stand for?

Answer 44

Direct credit

Question 45

What does BGC stand for?

Answer 45

Bank giro credit

Question 46

What is Bacs

Answer 46

Central government system used to process several different types of electronic payment, especially direct credit

Question 47

How do cheques appear on statements?

Answer 47

The number of the cheque

Question 48

What must be done when closing a current account?

Answer 48

- pay any fees and money they owe - return their payment cards and cheque book - people will need to tell the provider where to pay the balance on the account - by a cheque or a transfer to another account

Question 49

Why may the provider delay closing the account?

Answer 49

- automated payments due - cheques written on the account

Question 50

Why may a provider close a current account?

Answer 50

If the customer no longer meets minimum deposit criteria and the provider must give at least two months notice