Level 3 Business Finance Methods PDF

Level 3 Business Unit 3: Personal and Business Finance  Lesson Objectives Define different methods of making payments Analyse the different uses of these payment methods Evaluate the advantages and disadvantages of using these payment methods ...

Level 3 Business Unit 3: Personal and Business Finance  Lesson Objectives Define different methods of making payments Analyse the different uses of these payment methods Evaluate the advantages and disadvantages of using these payment methods  Cash Notes and coins come in a variety of values (denominations) Accepted in every retail outlet, making cash very reliable. Helps with budgeting, no technology required. Can be lost or stolen, counterfeiting, only appropriate for certain purchases, hard to trace.  Debit Cards Debit Cards are issued by a bank for their customers to make purchases/cash withdrawals. No need to carry cash, more secure, traceable transactions, protected purchases, online shopping Retailers may not accept cards at all, or for small transactions. Delays in appearing in transaction history may lead to overspending. Open to fraud  Credit Cards Credit Cards are a way of borrowing money from a lender such as a bank. Gives you more time to pay, can be used for large purchases, method of borrowing. Can encourage overspending/debt, non-payment leads to poor credit scores, credit limits, high interest rates.  Task Find a credit card online, write down the APR (interest) rate. Go to this website and enter that you are borrowing £5000 with a repayment of £200 a month with the interest rate you have found. Https://www.moneysupermarket.com/credit-cards/calculator/ How long will it take you to repay the debt and how much will it cost? Who can get the best deal in the class?  Cheque A written order to a bank that moves money from one bank account to another. Secure as only person named on the cheque can cash/deposit it. Can write the exact amount so no change given. Old fashioned, not many retailers still accept them. Take a long time to process.  Electronic Transfer Money is transferred directly between one bank account to another. Almost instantaneous, keeps a record of payment, no processing fees, convenient for one-off transactions The transfer needs setting up correctly or loss may occur. Cannot be used as a payment method in retail outlets.  Direct Debit An agreement between a bank and a third party allowing them to withdraw funds on a set day every month. Easy way to make regular payments (e.g. utility bills), easy to set up, amount easily changed to match amount owed. The payee has to claim back the money if the business accidently takes too much, fluctuations in amounts may make it hard to budget. The account holder must ensure they have enough funds in the bank to avoid being overdrawn. In pairs, answer the questions shown and compare your answers to your peers Collaborate as a class to write a model answer to these questions.  Standing Orders An agreement between a bank and a third party to pay a fixed amount each month. E.g. Paying rent to a landlord. Difference between a Standing Order and Direct Debit Easy to complete a household budget as the amount does not change. Easy to set up and cancel Payments are taken regardless of funds in bank account, which may lead to being overdrawn.  Pre-Paid Credit Cards Pre-paid credit cards allow you to spend online by loading a set amount of money onto a credit card. Can be used for purchasing goods online, secure, can’t overspend as it has a set amount loaded onto it. If the card is lost/stolen then you may lose the money loaded onto it. Additional fees may be charged.  Contactless Contactless payment allows you to use your bank card/phone to pay for items under £100 instantly without entering your PIN. Fast and instant, you have to enter your PIN occasionally for security. If your card is stolen then your card may be used to pay for items without using a PIN, transactions do not clear from your account instantly.  In pairs, answer this exam question. Share your answers with the rest of the group and collaborate to create a model answer.  Charge Cards Issued by financial institutions allowing customers to delay payment for goods and services but the balance must be cleared when a statement is issued. Charge cards examples Reduces risk of debt, can offer additional perks, short period of credit Often charges an annual fee, balance must be paid in full each month.  Store Cards Store cards are offered by an individual business and can only be used with that particular business. Allows customers to buy items on credit and spread the costs, customers may be offered additional discounts. Often have high interest rates, can  Mobile Banking 22 million people in the UK now use banking apps to manage their finances. All major banks offer increasingly sophisticated mobile banking services. Easy and convenient for customers, transactions are quick, no need to visit a bank, 24/7 banking, multi- layered security. Mobile banking has lead to many high-street banks to close, affecting vulnerable customers.  Task Task: Mini Debate As a class, debate the following statement; “Our society is too dependant on technology, we need to bring back traditional banks”  BACS, FPS Faster Payment Service and Bankers’ Automated Cle aring Service are methods of payments often used by businesses to pay employees’ wages. Payments processed within 2 hours, no fees, can be done online, in branch or over the phone. Not all banks offer Faster Payment, which may mean payments take 3 days to clear, has a set limit.  CHAPS Clearing House Automated Payment Service – transfers from one bank account to another. Payments can be processed on the same day as long as the request is made before a set time, no transfer limit. A fixed charge is often applied regardless of the amount being processed.