Business btec Unit 3

unit of account

places value on goods and services

Means of exchange

Allows us to trade

Legal tender

It is a legally recognised form of payment

Store value

Allows us to use in the future as it keeps its value

Personal attitudes

different people are more or less likely to take risks, depending on the reward and how you've been brought up

Life stages

As you grow up from childhood to adulthood, your financial needs change, each stage of your life has different implication that will affect not just your needs but also your attitude to money.

Culture

Different cultures are affected by tradition, religion + ethical belief have different attitudes to money

Life events

Events throughout your life impact your attitude to money, these can be in or out of your control

External influences

Factors outside your control (economy) have an impact, these effect your ability to spend and save

Interest rates

Low = borrow High = Save

Remaining solvent

Meet day to day expenditure + repay debts, set financial goals + save

Cash A+D

A- most widely accepted form of exchange D- can be lost or stolen

Debit card A+D

A- no need to carry cash D-not suitbale for small transactions

Debit card

Issued by banks for payments for goods and services deducted from a current account

Credit card

Issued by financial institutions allowing customers to delay payments for good and services

Credit card A+D

A- suitable for online transactions D- can encourage over spending leading to debt

Cheque

Written order to the bank to make a payment for a specific amount of monet taken from one persons account to another

Cheque A+D

A- low risk D- can make errors, viewed as old fashioned

Electronic transfer

Payment is transferred directly from one bank account to another

Electronic transfer A+D

A- proivdes record of payment D- risk of loss is incorrectly set up

Standing order

Aggreement made with the bank to transfer a fixed sum of money to a 3rd party account on a set date on a regular basis

Standing order A+D

A- same amount each time making it easy to budget D- payment is taken regardless of balance = lead to use of an overdraft facility

Pre- paid card

Money uploaded onto a card

Pre- paid card

A- can set budget in advance to avoid overspending D- no protection

Contactless card

Card with a feature that allows money to be transferred when it touches a contactless terminal

Contactless A+D

A- gaining popularity, convinient D- only accepted for small transactions

Charge card

Issued by financial institutions allowing customers to delay payments for goods and services for a short period of time; the balance must be paid off in full when a statement is issued

Charge card A+D

A- allows short period of credit D- must be paid in full each month

Store card

Issued by a retial outlet so customers can delay payments for good and services but for one store specifically

Store card A-D

A- often offer loyalty schemes D- can encourage overspending

Mobile banking

Ability to carry out financial transactions using a mobile device

Mobile banking A+D

A- convenient D- doesn't offer all the features of online banking

Bankers Automated Payment Scheme CHAPS

System which allows the transfer of payment directly from one bank account to another

CHAPS A+D

A- fast payment guaranteed within 2 hours D- limit set on amount transferred

Standard current account

Noramal account offered to people with normal credit rating, standard features

Packaged premium current account

Additional features (car, house insurance, credit card protection), additional charges

Basic current account

Limited features designed for people with poor credit rating, no overdraft, no interest on positive balances

Student current account

Designed to meet the needs of learners, aggreed overdraft and incentives of join the bank

Standard A+D

A- wide range of features D- no additonal perks

Packaged premium A+D

A- additonal perks D- additonal monthly charge, may not be value for money

Basic A+D

A- available for customers with low credit rating D- Limited features, no overdraft

Student A+D

A- bonuses offered are designed to meet the needs of learners D- overdraft could encourage overspending

Overdraft

Allows you to withdraw money you don't have from a current account

Personal loan

Ability to borrow a set amount of money to be repaid in regular instalments with interest

Hire purchase

Allows you to have use of an item immediately but pay for it in regular instalments, item remains property of the seeler untill all instalments have been made

Mortgage

Long term loan, secured against an asset (house), suitbale for assets that maintain value for a long time

Payday loan

Short term source of finance to bridge gap between receiving wage, small amounts at high rates, emergency

Persoanl loan A+D

A- pre agreed making planning and budgeting easier D- may have to be secured against an asset

Mortgage A+D

A- allows customer to spread the cost of an expensive items over a long period of time D- faliure to meet repayments could lead to the loss of a home and affect credit rating

Credit cards A+D

A- holder can pay above the minimum rate to speed up repayments D- can encourage overspending

Payday Loan A+D

A- help solve immediate short term cash flow problems D- interest rates very high, lead to debt

ISA Individual Savings Account

savings account where interest is not charged on interest received

Deposit + Savings account

Account where interest is paid on the balance and normally the holder needs to give notice before with drawals

Bonds and Gilts

Fixed term securities where the lender lends money to compaines and governments in return for interest payments, the money is invested for a specific period of time

Shares

Investments in a business, the shareholder becomes a part owner of the business, they recieve parts of the profits

Pensions

Long term savings plan where indivduals make regular contriburions called preium payments throughout their working life, can be state, company or private

ISA A+D

A- tax not charged on interest earned D- limit is set on the amount which can be placed in

Deposit + Savings acount A+D

A- interest earned on positive balances D- interest earned is taxed

Bonds and Gilts A+D

A- spreads risk across range of markets D- risk of losing some or all of the value of the investmeng of the bond or guilt fails

Shares A+D

A- Share prices flucturate offering a potnetial high reward, additional benefits including discounts and special offers D- no guarntee of any reward or return as investment can be lost

Pensions A+D

A- encourages savings throughout working life for retirement D- if comulosry payments are deducted this may affect short term living standards, movement between jobs may mean one policy stops and another starts reducing the cumulative value of the savings

Savings

Risks- low or 0 risk as money saved is guaranteed to be avaliable in the future Rewards- interest payments, financnial secuirity, peace of mind

Investment

Risks- investment can go wrong and all or some of the value may be lost, there is no guarantee of return Rewards- potential for high financial return

Car insurance

legal requirement, covers theft as well as accident, protects drivers, passengers, other road users

Home and contents insurance

Home- physicaly building (fire), Contents- physical items in the house (electrical equipment

Life assurance

Ongoing policy to pay a lump sum upon death

Life insurance

a policy for a set period of time to pay a lump if you die within that time period

Travel insurance

Protects while abroad, includes loss of theft of property, illness, cancellations and emergencies up to pre determined limits, specific holidays or activities (extreme sports ect) require additional cover

Pet insurance

Protects owners of ets against some or all the expenses

Health insurance

Covers individuals, families or employees against medical expenses including assesments, treatments and loss of earnings, can cover routine visits

Car insurance A+D

A- meets legal reqirements D- cost can be high depending upon assessed level of risk

Home and contents A+D

A- protects against damage which may otherwise be too expensive D- additional expense, some items cannot be replaced

Life assurance + insurance A+D

A- provides peace of mind D- if the polic holder does not die within the period of life insurance no payment is made

Travel A+D

A- covers medical cost while on holiday D- additional cosy while travelling abroad

Pet A+D

A- avoids expensive vet fees D- additional monthly expense

Health A+D

A- if used for private care this often results in quicker treatment and better facilities D- premiums can be expensive

Bank of england

UKs central bank responsinle for maintaining a healthy leaner of financial stability for a UK as a whole, Responsibilitys = issuing legal tender, setting interest rates and controlling the national debt

Banks

Organisation that handles financial transactions and stores money on behalf of its customers Services= holding deposits, making payments when instructed, supplying credit

Building societies

An organisiation that handles financial transaction and stores money on behalf of their members, members are part owners of the buliding society and have right to vote + recieve info on the running of the society, do not have shareholders

Credit union

Not for profit organisations that handle financial transactions and store money on behalf of their members, members are owners and have voting right

National savings and investment

Government backed organisation which offers a secure saving option, offers range of options ISAs, premium bonds, gilts and bonds

Insurance companies

Businesses that portect against the risk of loss in return for a premiums, profit making organisations

Pension companies

Businesses that sell policies to indiviuals privately or through employers to allow them to save now to fund retirement in the future

Pawnbrokers

Businesses or individuals who loan money against the security of an asset, if the item is not brought back within a specific period of time it will be sold on

Payday loans

An organisation that offers a short term source of finance used to bridge gap between now and next receiving wage, small amounts at high rates

Bank of England A+D

A- sets interest rates at a level designed to help achieve a stable economy D- can raise interest rates making borrowing more expensive

Banks A+D

A- secure place to store money D- savings only protected up 85,000

Building societies A+D

A- owned by memeber so costs are kepy low offering higher interest payments D- savings only protected up to 85,000

Credit unions A+D

A- owned by member theerfore costs are kept down offering higher interest payments D- savings only protected up to 85,000

National savings and investment A+D

A- government backed offering security D- often required to give notice on withdrawals

Insurance companies A+D

A- protects against unexpected loss or financial expenses D- profit making organisations therefore premiums will be charged to ensure shareholder needs are met

Pension companies A+D

A- provides a structure to help plan for financisl security after retirement D- poor investment decisions by pension companies may result in disappointing retirement

Pawnbrokers A+D

A- interest not charged D- the amount given for the asset is often lower than its actual worth

Payday loans A+D

A- quick way of aquiring cash needed for a short period of time D- interest charges are liekly high

Finacial conduct authority FCA

Independent organisation which regulates the actions of providers of financial services, 3 key areas = Authorisation- permitting financial service providers to trade, Supervision- making sure procedures and practices are in the interest of the consumer, Enforcement- using power to ensure standards are maintained

Financial ombudsmans service FOS

sorts out disputes between financial service providers, only becomes involved if they cannot be sorted beyween the consumer and the financial institution, fudned by complusory fees

Financial services compensation scheme FSCS

Uk organisation that pais compensation to a consumer if the service provider is unable to

Office of fair trading OFT

Government organisation established to regulate markets including financial markets, im to encourage fair practise and healthy competition between financial instituions

Legislation consumer credit

Laws passed by the UK government to enforce the regulation of any firm offering credit to consumers

Citizens advice

organisation run by charites on a range of issues financial and non- financial, physical centres as well as over the phone