BTEC Business Unit 3 Revision Questions With 100% Correct Answers.

Methods of payment - Answer-Cash, Credit/debit card; Standing orders; Direct debits; Cheque Cheque - Answer-a 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 - Answer-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 - 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 - Answer-Payment 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 paymentDisadvantages - Risk or loss if the transfer is set up incorrectly - not appropriate for face to face transactions Cash - Answer-Notes and coins in a wide range of denominations Give 2 advantages and disadvantages of using cash as a method of payment - Answer-Advantages - most widely accepted form of exchange - makes budgeting easier Disadvantages - can be lost or stolen - cannot be used for online purchases Debit card - Answer-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 - 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 - Answer-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 - 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 - Answer-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.