BTEC Business Unit 3 Revision Questions and answers, 100% Accurate. Rated A+

BTEC Business Unit 3 Revision Questions and answers, 100% Accurate. Rated A+ Methods of payment - -Cash, Credit/debit card; Standing orders; Direct debits; Cheque Cheque - -a written order directing a bank to pay money Give 2 advantages and 2 disadvantages of using a cheque as a method of payment - -Advantages - low risk form of payment as the cheque can only be cashed by the named payee - Widely accepted for face- to face or postal transactions Disadvantages - viewed as old fashioned - easy to make errors when writing the cheque which can cause problems for both the consumer and the recipient Credit Card - -Type of card issued by a bank that allows users to finance a purchase. It is issued by financial institutions allowing customers to delay payments for goods and services Give 2 advantages and 2 disadvantages of using a credit card as a method of payment - -Advantages - allows a period of credit that is interest free - usually one months - suitable for online transactions Disadvantages - Interest is charged on balances not paid off within a month - can encourage customer to overspend and get into debt Electronic transfer - -Payment is transferred directly from one bank account to another Give 2 advantages and disadvantages of using electronic transfer as a method of payment - - Advantages - almost instantaneous - provides a record of payment Disadvantages - Risk or loss if the transfer is set up incorrectly - not appropriate for face to face transactions Cash - -Notes and coins in a wide range of denominations Give 2 advantages and disadvantages of using cash as a method of payment - -Advantages - most widely accepted form of exchange - makes budgeting easier Disadvantages - can be lost or stolen - cannot be used for online purchases Debit card - -A bank card that automatically deducts the amount of a purchase from the checking account of the cardholder Give 2 advantages and disadvantages of using a Debit card as a method of payment - -Advantages - no need to carry cash - widely accepted & a secure method of payment Disadvantages - short time lapse between making the transaction and the money being drawn from the customers account - Not accepted or appropriate for small transactions Charge card - -A payment type that works just like credit cards except the balance must be paid in full every month. Give 2 advantages and disadvantages of using a Charge card as a method of payment - -Advantages - allows a short period of credit - offers a high spending limit or no limit at all so larger purchases can be covered easily Disadvantages - Must be paid in full each month - Failure to replay results in very high late payment fees, usually much higher than a standard credit card Contactless card - -A card with an embedded chip that only needs to be held close to a terminal to transfer its data; no PIN number needs to be entered. Give 2 advantages and disadvantages of using a contactless card as a method of payment - - Advantages - secure method of making a payment - fast and efficient to make a transaction Disadvantages - only accepted for relatively small transactions - still not widely accepted at outlets pre-paid card - -Money is uploaded onto a card with transactions then being withdrawn to reduce the balance Give 3 advantages and disadvantages of using a prepaid card as a method of payment - -Advantages - Can set a budget in advance to avoid overspending - if lost or stolen the loss is limited to the remaining balance on the card Disadvantages - no protection if lost - sometimes requires an initial fee to purchase or set up the card e.g . Oyster travel cards Standing Order - -An agreement made with a bank to transfer a fixed sum of money to a third party account on a set date on a regular basis, e.g. pay £30 for a phone contract each month Give 2 advantages and disadvantages of using standing order as a method of payment - -Advantages - the same amount is paid each time making it easier for the payee to budget - easy to set up and to cancel as required Disadvantages - payments are taken regardless of the customer's balance which could lead to the unplanned use of an overdraft - payments will continue unless cancelled Direct debit - -An agreement made with a bank allowing a third party to withdraw money from an account on a set day to pay for goods or services received, e.g. pay a gas bill Give 2 advantages and disadvantages of using a direct debit as a method of payment - -Advantages - an easy way to make regular payments e.g. household utility bills - amount paid can vary to ensure the payment matches the amount required Disadvantages - if the payer makes a mistake and takes too much, it is the payee's responsibility to claim the money back - the payee determines the amount to be paid each time which can make it difficult to budget Clearing House Automated Payment System (CHAPS) - -A system that allows the transfer of payments directly from one bank account to another usually on the same day. Give 2 advantages and disadvantages of using CHAPS as a method of payment - -Advantages - transfers can be made in the same day providing instructions are received by a specified time - there is no limit to the amount of money that can be sent Disadvantages - there is usually a fixed charge for each transaction regardless of the amount transferred - not a common payment method used by consumers unless it is for a large purchase e.g. buying a house Types of current accounts - -Student , basic , packaged- premium, standard Standard Account - -This type of account provides full day to day banking facilities e.g. cheque book, debit card , easy access to your money and an authorised overdraft facility Give 2 advantages and disadvantages of using a standard account as a type of current account - - Advantages - No charges on credit balances - offers the wide range of banking facilities required Disadvantages - possibility of high interest charges on overdrafts - standard features only and no additional benefits are available Packaged, premium account - -This account offers additional features to a standard account, for example car and house insurance, credit card protection, breakdown cover and cash back on certain transactions. The bank may have additional charges for these accounts so it is important that you check whether you are being offered a good deal or not. Give 2 advantages and disadvantages of using a packaged premium as a type of current account - - Advantages - It is often cheaper than buying all the additional benefits separately - no charges on credit balances Disadvantages - the value of the incentives on offer is only worthwhile if they meet the needs of the customer and are used - additional monthly charges are often applied Basic Account - -This account offers only limit features designed for those customers who may otherwise find difficult to open a bank account due to poor credit rating. A basic account will not offer a overdraft and will not pay interest on positive balances. Give 2 advantages and disadvantages of using a basic account as a type of current account - - Advantages -available to customers with a low credit rating - offers an easy first step to gaining access to basic banking features e.g. paying in and withdrawing money Disadvantages - limited facilities can prove an inconvenience e.g. no debit card - may take time to improve credit rating in order to progress to a standard account student account - -These are designed to assist young people and students to become prudent with their personal finances. They may come with bonus features such as interest free overdraft facilities Give 2 advantages and disadvantages of using a student account as a type of current account - - Advantages - low deposits required - in some cases paying in a student loan is sufficient - incentives and freebies can be particularly useful - free rail cards Disadvantages - low interest on credit balances compared with a standard current account - overdraft facilities could encourage overspending Bankers' Automated Clearing Service (BACS) Faster payment service (FPS) - -A system that allows the transfer of payments directly from one bank account to another in 3 working days ( unless faster payment is available) Give 2 advantages and disadvantages of using a BACS as a method of payment - -Advantages - faster payments allows almost instant transfers that are guaranteed within two hours - no additional costs Disadvantages - a limit is set on the amount that can be transferred in a single transaction - faster payment is not offered by all banks and branches and therefore BACS may have to be used which takes 3 days to clear Mobile banking - -The ability to carry out financial transactions using mobile devices such as phones or tablets Give 2 advantages and disadvantages of using mobile banking as a method of payment - -