BTEC Business Unit 3 Revision Exam 43 Questions with Answers,100% CORRECT

BTEC Business Unit 3 Revision Exam 43 Questions with Answers Methods of payment - CORRECT ANSWER Cash, Credit/debit card; Standing orders; Direct debits; Cheque Cheque - CORRECT ANSWER a written order directing a b ...

BTEC Business Unit 3 Revision Exam 43 Questions with Answers Methods of payment - CORRECT ANSWER Cash, Credit/debit card; Standing orders; Direct debits; Cheque Cheque - CORRECT 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 - CORRECT ANSWER 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 - CORRECT 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 - CORRECT ANSWER 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 - CORRECT 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 - CORRECT ANSWER 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 - CORRECT ANSWER Notes and coins in a wide range of denominations Give 2 advantages and disadvantages of using cash as a method of payment - CORRECT 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 - CORRECT 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 - CORRECT ANSWER 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 - CORRECT 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 - CORRECT ANSWER 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 - CORRECT 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. Give 2 advantages and disadvantages of using a contactless card as a method of payment - CORRECT ANSWER 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 - CORRECT ANSWER 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 - CORRECT ANSWER 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 - CORRECT ANSWER 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 - CORRECT ANSWER 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 - CORRECT ANSWER 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 - CORRECT ANSWER 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) - CORRECT ANSWER 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 - CORRECT ANSWER 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 - CORRECT ANSWER Student , basic , packaged- premium, standard Standard Account - CORRECT ANSWER 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 - CORRECT ANSWER 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 - CORRECT ANSWER 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 - CORRECT ANSWER 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 - CORRECT ANSWER 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 - CORRECT ANSWER 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 - CORRECT ANSWER 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 - CORRECT ANSWER 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) - CORRECT ANSWER 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 - CORRECT ANSWER 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 - CORRECT ANSWER 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 - CORRECT ANSWER Advantages -convenient to use as they can be accessed and at any time and in any place - more secure and risk free than online/ internet banking Disadvantages - mobile banking is not available on all phones and may require a specific app to be downloaded to use the service - regular use of mobile banking can lead to extra charges given by the bank Store card - CORRECT ANSWER credit card issued by a store/shop for that store Give 2 advantages and disadvantages of using a store card as a method of payment - CORRECT ANSWER Advantages - allows a short period of interest free credits- usually one month - offers cardholders specific loyalty schemes, incentives and discounts Disadvantages - only accepted in the store or stores specified - interest is paid on outstanding balances and rates of interest are often quite high Personal Finance - Types of borrowing - CORRECT ANSWER Payday loans, credit cards , mortgages, hire purchases , personal loan , overdrafts Personal loans - CORRECT ANSWER Allows an individual to borrow a set amount of money which is to be repaid in regular instalments, with interest Give 2 advantages and disadvantages of using a personal loan as a method of borrowing - CORRECT ANSWER Advantages - budgeting is easier as the payment plan will be pre- agreed and involve regular set payments - useful when looking to purchase a specific item of medium to high value e.g. car Disadvantages - likely to be an unsecured loan and therefore interest rates are going to be high - not suitable for everyone as good credit rating and credit history is required to be eligible hire purchase - CORRECT ANSWER Allows an individual to have use of an item immediately but pay for it in regular instalments, the property is only owned by the individual when final instalment has been paid. Give 2 advantages and disadvantages of using hire purchase as a method of borrowing - CORRECT ANSWER Advantages - spreads the cost of an expensive item over time - credit is secured against the specific time being purchased Disadvantages - it is a fixed contract. If your circumstances change during this and repayments cannot be made, you could lose the asset - likely to pay more for the asset compared to using cash due to interest charged