Unit 3-Different ways to pay (A2) Flashcards
What is cash?
Notes and coins that come in varieties of value
Advantages of cash
-Accepted in every retail outlet
-making cash is very reliable
-helps with budgeting
-no technology required
Disadvantages of cash
-Can be lost or stolen
-Counterfeiting
-Only appropriate for certain purchases
-hard to trace
What is a debit card?
A bank issues debit cards for their customers to make purchases/cash withdrawals.
Advantages of debit cards
-No need to carry cash
-more secure
-traceable transactions
-protected purchases
-online shopping
Disadvantages of debit card
-retailers may not accept cards at all or small transactions
-Delays in appearing in transaction history may lead to overspending.
What is a credit card?
Credit cards are a way of borrowing money from a lender such as a bank.
Advantages of credit cards
-gives you more time to pay
- can be used for large purchases
-method for borrowing
Disadvantages of credit cards
-can encourage overspending/debt
-non-payment leads to poor credit scores
-credit limits
-high interest rates
What is a cheque?
A written order to a bank that moves money from one bank account to another.
Disadvantage of cheque
-Old fashioned
-not many retailers still accept them
-Take a long time to process
Advantages of a cheque?
-secure as only person named the cheque can cash/deposit it.
-Can write the exact amount so no change is given
What is electronic transfer?
Money is transferred directly between one bank account to another
Advantages of electronic transfer
-almost instantaneous
-keeps a record of payment
-no processing fees
-convenient for one-off transactions
Disadvantages of electronic transfer
-the transfer needs to be set up correctly or loss may occur
-Cannot be used as a payment method in retail outlets
What is direct debit ?
An agreement between a bank and a third party allowing them to withdraw funds on a set day every month.
Advantages of direct debit
-easy way to make regular payments
-easy to set up
-amount easily changed to match amount owed
Disadvantages of direct debit
-The payee has to claim back the money if the business accidentally takes too much
-fluctuations in accounts may be hard to budget
-The account holder must ensure they have enough funds in bank to avoid being overdrawn.
What is standing orders?
An agreement between a bank and a third party to pay a fixed amount each month.
e.g. paying rent to a landlord
Advantages of standing orders
-Easy to complete a household budget as the amount does not change
-Easy to cancel
Disadvantages of standing orders
Payments are taken regardless of funds in bank account, which leads to being overdrawn
What is pre-paid credit cards?
Pre-paid credit cards allow you to spend online by loading a set amount of money onto a credit card.
Advantages of pre-paid credit cards?
-can be used for purchasing goods online
-secure
-can’t overspend as it has a set amount loaded onto it
Disadvantages pre-paid credit cards
-if the card is lost/stolen then you may lose the money loaded onto it
-Additional fees may be charged
