Unit 1 Topic 3

Question 1

What does ATM stand for?

Answer 1

Automated teller machine (also known as a cash machine).

Question 2

What is Bacs?

Answer 2

The central payment system used to process different types of electronic payment.

Question 3

What’s a banker’s draft?

Answer 3

A banker’s draft is similar to a cheque but the payment is signed and guaranteed by the financial services provider that issues it, rather than by an individual. Banker’s drafts are used for paying large sums of money but are falling out of fashion for being old fashioned and not particularly secure.

Question 4

What is cashback?

Answer 4

A service offered by some retailers when customers pay by card. The retailer gives the customer cash and debits the amount of cash handed over from the customer’s payment card.

Question 5

What’s a cash card?

Answer 5

A card used to withdraw cash from ATMs or branch counters.

Question 6

What is CHAPS?

Answer 6

Clearing House Automated Payment System, a same-day payment system for high-value transactions, such as house purchase.

Question 7

What is a cheque?

Answer 7

A written instruction to the provider (eg a bank or building society) to pay a specified amount to a specified person or organisation.

Question 8

What is a contactless card? What is it mostly used for?

Answer 8

A card that can be read simply by holding it in front of a card reader - it is used for low value payments.

Question 9

What is a debit card?

Answer 9

A card that can be used to withdraw cash, to make face-to-face transactions in, for example, shops, and to make payments online or over the phone.

Question 9

What is direct credit?

Answer 9

An electronic payment into an account.

Question 10

Give an example of direct credit

Answer 10

A salary
A benefit payment

Question 11

What is direct debit?

Answer 11

An electronic payment out of an account. The amount and frequency of a direct debit payment can vary.

Question 12

What is Faster Payments?

Answer 12

An electronic payment service that enables payments to be made within two hours.

Question 13

What is a mandate?

Answer 13

A paper or online instruction to a provider (eg bank or building society) to make a payment from an account.

Question 14

What are prepaid cards?

Answer 14

A card that has to have money credited to it before the card holder can use it to pay for goods. Once the initial sum of money on the card runs out, it can be topped up again. Some prepaid cards can be loaded with foreign currency and used abroad.

Question 15

What is a standing order? What are they used for?

Answer 15

An electronic payment out of an account
They’re used to make regular payments of the same amount

Question 16

What is a transaction?

Answer 16

Buying or selling something

Question 17

What is meant by the term ‘transaction need’?

Answer 17

The reason why someone needs to make a payment, eg needing to top up your phone credit so that you can use your phone is a transaction need.

Question 18

What is a traveller’s cheque? What can it be used for?

Answer 18

A pre-printed cheque for a set amount of currency eg 50 or 100 US dollar or euros. A traveller’s cheque can be exchanged for local currency or used to make payments while abroad.

Question 19

Name two advantages of using cheques

Answer 19

Secure way of paying money
Easy to carry and use

Question 20

Name two disadvantages of cheques

Answer 20

Cannot be certain of immediate payment
Some business’ refuse to accept cheques

Question 21

What are cheques often used for?

Answer 21

To pay money to friends or family

Question 22

Some people find cash helps them to budget. True or false?

Answer 22

True

Question 23

Name 3 disadvantages of using cash

Answer 23

Carrying large amounts can be risky
Some sellers prefer other payment methods
If a payment needs to be made every month (bills)

Question 24

Name 3 advantages of using cash

Answer 24

Convenient to the payer Instant Low risk at low values

Question 25

When is paying with cash ideal?

Answer 25

For everyday, low-value transactions when in face-to-face situations

Question 26

What are the four criteria for evaluating each available payment method?

Answer 26

Convinience for the payer How acceptable it is to the payer Speed Safety

Question 27

Give three examples of when cash could be used as a payment method

Answer 27

Buying public transport tickets Newspaper at a local shop Coffee in a café

Question 28

Name the most commonly used account for making and receiving payments

Answer 28

A current account

Question 29

Explain online banking - what does it enable account holders to do? How can it be accessed?

Answer 29

Enables account holders to give instructions for account transactions via the internet. Can be accessed by registering for the service. Enables holders to set up regular payments.

Question 30

Give 3 advantages of electronic payment

Answer 30

Fast Safe Convenient

Question 31

Name two disadvantages of electronic payments

Answer 31

Security The risk that the account holder will make a mistake

Question 32

What do banking apps allow account holders to do?

Answer 32

Check balances Pay in cheques digitally Set up direct debits Set up standing orders Transfer money from one account to another

Question 33

What do online payment services alllow people to do? Name an example

Answer 33

Enable people to pay each other without exchanging current account details Paypal

Question 34

When can cash cards NOT be used?

Answer 34

To pay sellers in face-to-face situations, over the internet or by telephone.

Question 35

What are cash cards usually branded as?

Answer 35

VISA or Mastercard.

Question 36

Who are cash cards often offered to?

Answer 36

People under 18 or those on low incomes to enable them to access their cash easily.

Question 37

Give an example of a pre-payment card

Answer 37

Oyster card

Question 38

Name four methods of making payment abroad

Answer 38

Debit Cards Pre-paid travel cards Cash in the local currency Traveller’s cheques

Question 39

What are pre-paid travel cards?

Answer 39

Plastic payment cards that can be loaded with money and then used to make payments abroad wherever accepted.

Question 40

Name the two main providers of pre-paid travel cards

Answer 40

Travelex Caxton

Question 41

Name the four factors to consider when selecting a payment method

Answer 41

How convenient the payer finds methods Which methods the seller accepts How quickly the transaction can be made/completed How safe the method is perceived to be