Business Btec Unit A

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Created by
Iris Ferrari

Subdecks (5)

Cards (235)

  • Functions of money

    Unit of account, Means of exchange,
    Store of value & Legal tender
  • Role of money

    Personal attitudes
    Life stages
    Culture
    Life events
    External influences
    Interest rates
  • Principles in planing personal finances
    Avoid debt
    Control costs
    Avoid repossession by setting financial goals
    Remain solvent by setting financial goals
    Maintain a good credit rating
    Manage money to fund purchases
    Counter effects of inflation
  • Benefits of planning

    Good credit rating
    Generate an income
    Fund unexpected purchases
  • Risks of not planning
    Debt
    Legal repossession
    Poor credit rating
    Unable to save for the future
  • Ways to pay
  • Cash - notes and coins
    Advantages
    - Accept form of exchange
    - Physical
    Disadvantages
    - Can be stolen
    - Cannot be used online
  • Debit card - issued by banks, paid by the cardholder

    Advantages
    - Secure method of payment
    - Suitable for online transactions
    Disadvantages
    - Not accepted for small transactions
    - Risk of card details being hacked
  • Credit card - issued by financial companies, paid by the card issuer
    Advantages
    - One month interest free credit
    - Loyalty schemes offered
    Disadvantages
    - Encourage overspending
    - Fee charged
  • Cheque - written order to a bank, payment to an account

    Advantages
    - Secure method
    - As an exact amount
    Disadvantages
    - Old method
    - Risk of cheque "bouncing"
  • Electronic transfer - direct payment
    Advantages
    - Easy to set up
    - Instantaneous
    Disadvantages
    - Risk of loss if incorrectly set up
  • Direct debit - third part withdraws money from an account, agreed with the bank
    Advantages
    - Easy to make regular payments
    - Quick to set up
    Disadvantages
    - Difficult to plan expenditure
    - Must have sufficient funds
  • Standing order - transfer a fixed amount to a third party on a regular basis

    Advantages
    - Easy to plan expenditure
    - Easy to set up and cancel
    Disadvantages
    - Must have sufficient funds
    - Continual payments unless cancelled
  • Prepaid cards - cash uploaded onto a card, used to make purchases

    Advantages
    - Accepted by retailers
    - Effective way to control costs spent by children on school lunches
    Disadvantages
    - Not protected if loss
    - Set up fees
  • Contactless cards - payment made when card touches terminal
    Advantages
    - Popular
    - Secure method
    Disadvantages
    - Accepted for small amount only
    - Not widely accepted
  • Charge cards - issued by financial companies
    Advantages
    - Avoid carrying cash
    - Short period of credit
    Disadvantages
    - Paid in full each month
    - Annual fixed fee
  • Store cards - issued by retailers, similar to credit cards
    Advantages
    - Interest free for a short period
    - Loyalty schemes
    Disadvantages
    - Only accepted in issuing store
    - Interest charged on balances
  • Mobile banking - using an app
    Advantages
    - Convenient
    - Secure
    Disadvantages
    - Limited features compared to internet
    - Unable to access full range of services
  • BACS - electronic transfer

    Advantages
    - No fee
    Disadvantages
    - 3 days to transfer
  • Faster payments - electronic transfer
    Advantages
    - Takes 2 hours to transfer
    Disadvantages
    - Not offered by all banks
  • CHAPS - electronic transfer
    Advantages
    - Same day transfer
    - No limit on amount transferred
    Disadvantages
    - Fee is charged
  • Current accounts

    Account designed for frequent use e.g. deposits and withdrawals
  • Features of current accounts
    Interest paid on positive balance
    Interest charged on negative balance
    Overdraft limit
    Additional incentives
  • Types of current accounts
  • Standard - a fair credit rating

    Advantages
    - Convenient for receiving payments
    - Includes a cheque book, debit card, overdraft facility
    Disadvantages
    - High charges on overdraft facilities
    - No additional perks
  • Packaged, premium - offers additional features

    Advantages
    - Includes features such as car insurance, breakdown cover and credit card protection
    Disadvantages
    - Monthly fee charged
    - Unable to meet needs
  • Basic - for customers with poor credit rating

    Advantages
    - No banking fees
    - Access to depositing and withdrawals
    Disadvantages
    - No debit card
    - No overdraft facility
  • Student - for learners in higher education
    Advantages
    - Easy to handle fees and loans
    - Offers bonuses such as travel discount
    Disadvantages
    - Encourages overspending with overdraft facility
    - High charges
  • Different types of borrowing
  • Overdraft - withdraw money for short-term needs e.g. to pay bills
    Advantages
    - Interest only charged on outstanding balance
    - No penalties
    Disadvantages
    - High interest rates
    - Expensive form of borrowingP
  • Personal loan - to fund expensive items, repaid in regular instalments
    Advantages
    - Easy to plan expenditure
    - Useful to buy a car
    Disadvantages
    - Not suitable for short-term loans
    - Secured against an asset
  • Hire purchase - buy an item immediately, paid in regular instalments
    Advantages
    - Cost spread over 1 to 5 years
    - Afford something customers can't
    Disadvantages
    - Higher interest rates
    - Risk of repossession
  • Mortgages - long-term loan to fund a house
    Advantages
    - Fixed interest rates
    - Spread over a long period of time
    Disadvantages
    - Interest rates can vary eventually
    - Loss of property if failure to meet repayments
  • Credit card - must be paid for when a statement is issued

    Advantages
    - Protection on purchases
    - No interest if paid in full
    Disadvantages
    - Encourage overspending
    - Higher interest rates
  • Payday loans - short-term loan for small amounts to pay bills
    Advantages
    - Solve cash flow problems
    - Easy to secure
    Disadvantages
    - Expensive
    - High interest rates
  • Different types of saving
  • Individual Savings Account

    Advantages
    - Tax is not charged on earnings
    - Slightly higher interest rates than alternatives
    Disadvantages
    - Too many withdrawals = penalty
    - Limit on amount placed
  • Deposit and Savings account - must give notice before withdrawing
    Advantages
    - Interest earned on positive balance
    - Comes with a savings plan
    Disadvantages
    - Tax charged on interest earned
    - Lower interest rates on savings, results in loss of savings if borrowing too
  • Premium bonds - doesn't pay interest, instead purchasing bonds comes with the chance of winning a tax-free prize

    Advantages
    - Chance to win more than earned in interest
    - Easily withdrawn with no loss
    Disadvantages
    - Loss in value due to inflation
    - Reviewed by the government
  • Bonds and gilts - money is lent to companies and government for interest payments

    Advantages
    - Regular fixed returns
    - Risk is spread across many markets
    Disadvantages
    - Value can fall
    - Interest payments are only received if the issuer makes payments