Level 3 Business Unit 3: Personal Finance

Level 3 Business Unit 3: Personal and Business Finance

• Lesson Objectives: Define different payment methods, analyse their uses, and evaluate their advantages and disadvantages.

Cash

• Comes in various denominations (notes and coins).
• Accepted everywhere, reliable.
• Easy for budgeting, no technology needed.
• Can be lost, stolen, or counterfeited.
• Not suitable for all purchases.
• Hard to trace.

Debit Cards

• Issued by banks for purchases and cash withdrawals.
• More secure and traceable than cash.
• Protects purchases.
• Online transactions use them.
• Some retailers may not accept them.
• Delays in appearing in transaction history can lead to overspending.
• Open to fraud.

Credit Cards

• A way to borrow money from a lender (e.g., bank).
• Allows for more time to pay.
• Can be used for large purchases.
• Can encourage overspending and debt.
• Leads to poor credit scores, credit limits, and high-interest rates.

Cheque

• A written order to a bank to transfer money between accounts.
• Secure as only the named person can cash it.
• Exact amounts prevent change issues.
• Old-fashioned – few retailers accept them.
• Processing takes a long time.

Electronic Transfer

• Transfers money directly between accounts.
• Almost instantaneous.
• Records payments.
• No processing fees.
• Convenient for one-off transactions.
• Requires correct setup to avoid loss.
• Not a payment method in retail outlets.

Direct Debit

• Agreement between a bank and a third party (e.g., utilities).
• Funds withdrawn on a set day.
• Easy for regular payments.
• Can be difficult to budget if amounts fluctuate.
• Payee must claim back overpayments.
• Account holder must have sufficient funds to avoid overdrawing.

Direct Debit Guarantee

• Ensures payments, refunds, and cancellation procedures.
• A process for disputes if there's an error.

Standing Orders

• Set amount paid monthly to a third party (e.g., landlord).
• Easy for budgeting as the amount doesn't change.
• Can be easily set up or cancelled.
• Payments are taken regardless of funds available, leading to potential overdraws.

Pre-Paid Credit Cards

• Loaded with a set amount for online spending.
• Secure and prevent overspending.
• Can lose the loaded money if the card is lost or stolen.
• Additional charges may be applied.

Contactless

• Quickly pay for items under a specified amount (e.g., £100) using a bank card/phone without a PIN.
• Fast and instant.
• PIN needed occasionally for security.
• Risk if the card is stolen.
• Transactions may not clear instantly.

Charge Cards

• Allow payment delays for goods and services.
• Balance must be paid when a statement is issued.
• Can have benefits like perks—but may come with an annual fee.
• Risk of debt reduced.

Store Cards

• Offered by individual businesses.
• Used only for purchases at that business.
• Customers can spread costs and may get discounts.
• Usually have high-interest rates.

Mobile Banking

• 22 million UK citizens use mobile apps for banking.
• Quick, convenient, 24/7, multi-layered security.
• Increased sophistication from major banks.
• Lead to close of high-street branches, affecting vulnerable customers.

Task: Mini Debate

• Debate the statement: "Our society is too dependent on technology, we need to bring back traditional banks."

BACS/FPS (Faster Payments Service)

• Method for businesses to pay wages.
• Payments cleared within 2 hours.
• No fees.
• Can be done online, in a branch, or over the phone.
• Not all banks offer it; some take 3 days to clear and have limits.

CHAPS (Clearing House Automated Payment Service)

• Transfers money between accounts on the same day (if requested early enough).
• No transfer limit.
• Fixed charge applied, regardless of the amount.