Unit 5: Cash or Credit? Vocabulary Flashcards

Vocabulary flashcards covering key cash and credit concepts from the Unit 5 notes.

Cash buying

Paying the full amount for a purchase at the time you receive the goods or services; can be done using notes and coins, EFTPOS/debit cards, or Layby (as noted in the lesson).

Notes and coins

The physical currency (paper notes and metal coins) that is legal tender for payments.

EFTPOS

Electronic Funds Transfer at Point Of Sale; immediate transfer of funds from the buyer’s account to the retailer at the time of purchase.

Debit card

A payment card that draws funds directly from your bank account, used for purchases online or in-store.

Layby

A cash-buying method where you deposit and the retailer holds the goods until they are paid for in full; ownership is gained after full payment, with no credit involved.

Cheque

A written instruction to a bank to withdraw funds from the writer’s account and pay the specified recipient; usage has declined.

Bank statement

A monthly document from a bank detailing all transactions and balances for an account.

Direct Debit (DD)

An instruction allowing a merchant to withdraw funds from your account on agreed dates.

Direct Credit (DC)

A transfer of funds into your bank account from another party.

Overdraft (OD)

Spending more than you have in your account, resulting in a negative balance with possible interest charges.

Opening balance

The amount of money in an account at the start of a statement period.

Closing balance

The amount of money in an account at the end of a statement period.

BNPL (Buy Now, Pay Later)

A payment arrangement that lets you buy now and pay later; commonly offered via Hire Purchase, Credit Cards, Store Cards, or an Overdraft.

Hire Purchase

In-store financing that allows you to take goods home immediately and pay for them in installments over a set term, often with setup fees and interest.

Credit Card

A card issued by a lender that allows purchases on credit; the balance must be repaid, typically within a month to avoid high interest.

Store Card

A retailer-issued credit card usable mainly at that retailer; usually must be paid within a month or interest is charged.

Interest rate

The percentage charged for borrowing money; calculated as Interest divided by price times 100.

Finance rate

The true cost of credit, including interest and fees; must be shown on any credit or loan contract.

Booking fee

A fixed charge added when arranging certain credit or financing options.

Compulsory insurance

Insurance that lenders require as part of a credit agreement.

Administration fee

A fee charged to cover processing and management of a loan or credit facility.

Hire Purchase vs Layby

Hire Purchase is a credit purchase with immediate possession of goods but paid over time; Layby is a cash purchase with possession only after full payment.

Advantages of cash

No debt, potential discounts, can buy from anywhere, easier to control spending, and immediate ownership.

Disadvantages of cash

Requires carrying cash for large purchases, risk of loss or theft, and you must save before buying.

Advantages of credit

You can use goods before paying, don’t need to carry cash, and payments can be spread over time.

Disadvantages of credit

Fees and interest, potential impulse buying, harder to save, and future income is committed to debt.

Credit card application information

Information typically required: current address and duration, employer details, income (with evidence), assets as security or guarantor, previous credit history, existing debts, and any prior defaults.

Buying on credit

Purchasing now and paying later using methods such as Hire Purchase, Credit Cards, Store Cards, or Overdraft.

Direct Debit vs Direct Credit

Direct Debit withdraws funds from your account by another party’s instruction; Direct Credit deposits funds into your account from another party.