BTEC Business Unit 3 Revision
Methods of payment - answerCash, Credit/debit card; Standing orders; Direct debits;
Cheque
Cheque - answera written order directing a bank to pay money
Give 2 advantages and 2 disadvantages of using a cheque as a method of payment -
answerAdvantages
- 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 - answerType 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
- answerAdvantages
- 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 - answerPayment is transferred directly from one bank account to
another
Give 2 advantages and disadvantages of using electronic transfer as a method of
payment - answerAdvantages
- 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 - answerNotes and coins in a wide range of denominations
Give 2 advantages and disadvantages of using cash as a method of payment -
answerAdvantages
- most widely accepted form of exchange
- makes budgeting easier
Disadvantages
- can be lost or stolen
- cannot be used for online purchases
Debit card - answerA 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 -
answerAdvantages
- 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 - answerA 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
- answerAdvantages
- 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 - answerA 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 - answerAdvantages
- secure method of making a payment
- fast and efficient to make a transaction
Disadvantages
- only accepted for relatively small transactions
Methods of payment - answerCash, Credit/debit card; Standing orders; Direct debits;
Cheque
Cheque - answera written order directing a bank to pay money
Give 2 advantages and 2 disadvantages of using a cheque as a method of payment -
answerAdvantages
- 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 - answerType 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
- answerAdvantages
- 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 - answerPayment is transferred directly from one bank account to
another
Give 2 advantages and disadvantages of using electronic transfer as a method of
payment - answerAdvantages
- 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 - answerNotes and coins in a wide range of denominations
Give 2 advantages and disadvantages of using cash as a method of payment -
answerAdvantages
- most widely accepted form of exchange
- makes budgeting easier
Disadvantages
- can be lost or stolen
- cannot be used for online purchases
Debit card - answerA 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 -
answerAdvantages
- 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 - answerA 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
- answerAdvantages
- 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 - answerA 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 - answerAdvantages
- secure method of making a payment
- fast and efficient to make a transaction
Disadvantages
- only accepted for relatively small transactions
