Exam Questions

Identify 2 impacts on an individual of a rise in rate of interest regarding borrowing and saving

• Mortgages and loans more expensive. Less disposable income.

• More interest earned on savings, more likely to save. More disposable income.

State ways an individual can maintain a good credit rating

• Paying of all spending on a consistent, regular basis.

• By being on the electoral register.

Give some advantages of using electronic transfer as a method of payment

• Transferred directly, so immediate.

• Don’t have to be physically present.

Give some advantages of planning expenditure

• Achieving financial goals.

• Awareness of outgoings.

• Prevents overspending.

• Money can be allocated to savings.

Give some features of a basic current account

• Ability to pay money in and out of an account.

• Offer a debit card for use.

State roles of the Financial Services Compensation Scheme (FSCS)

• Protect for customers in accounts up to £85,000/£170,000 for joint accounts.

• Raises public confidence in financial services industry.

• FSCS protects against misleading financial advice.

Give advantages for a consumer of having a credit card

• Can build credit score by paying off spending regularly, so better borrowing conditions in future.

• Can spend money you don’t have, so can instantly make purchases.

• If you pay it off on time, you have no interest, so no cost of borrowing.

Give advantages of using mobile payment apps.

• More convenient than carrying cash/cards as most carry their phone everywhere.

• More secure than cash/cheques as they require a PIN/facial recognition/fingerprint.

• Allows quick payment.

Give advantages of using hire purchases

• Cost of buying is a fixed payment as interest rates are fixed until end of agreement - easier to budget.

• Hire purchase finance will make a higher priced item more affordable as payment can be spread across a number of months.

Give disadvantages of using hire purchases

• If payments can’t be made, the product can be repossessed.

• If repayments are missed/late, can damage credit score.

Give advantages of using a price comparison website for a savings account

• Saves time rather than filtering through different bank websites.

• Helps consumer see a wide range of accounts.

• Convenient, available 24/7.

Give reasons an individual should consider expenditure when planning finances

• To avoid getting into debt.

• To avoid overspending.

• Maintain a good credit rating.

Give disadvantages of using cash as a method of payment

• Cash can be lost/stolen, preventing holder using cash.

• Threat of counterfeit so may not be accepted as payment.

• Cannot be used to pay online, limiting access to some businesses and products.

Give advantages of using an overdraft to borrow money

• Can continue to purchase goods/services when you don’t have any funds in account.

• Simple application process so can access funds quickly.

• Interest only charged on sum used for number of days used which may reduce costs compared to other forms of borrowing like a loan.

Give some advantages of using savings to reduce mortgage borrowing

• Reducing borrowing improves credit score, helping obtain funds in the future if needed e.g. personal loan.

• Will reduce term of the mortgage if currently monthly payment levels are maintained.

Give some disadvantages of using savings to reduce mortgage borrowing

• Once paid you cannot access the funds again.

• Good to have savings in case something unexpected happens, e.g. could be use for mortgage payments monthly if she lost her job.

Identify features of a standing order as a method of payment

• Automatically transferred.

• Fixed amounts paid.

• Payments at regular intervals.

Give advantages of mobile banking

• Accessed from anywhere internet is available.

• Can check balance online, saving time.

• Easy for small businesses and window cleaners.

• Can transfer funds from one account to another quickly.

What are the personal attitudes of young people towards borrowing?

• May borrow from family members due to being unable to access larger loans due to earning power.

• Four times more likely to overborrow than the rest of society.

• Lack of understanding of risks of overborrowing.

What are the attitudes of young people towards saving?

• May earn limited amounts (only half in work) so less able to save.

• May have to take out student loans.

• May have needs and wants they may have to be satisfied immediately, so money is spent quickly after receiving it.

What are the advantages of an individual voluntary arrangement?

• Unlike bankruptcy, you don’t automatically lose personal assets.

• Legal protection from creditors - once approved, creditors cannot add extra interest or charges, and can’t take further legal action.

What are the disadvantages of applying for an IVA?

• Remains on credit file for 6 years from when it is approved, making credit and loans more difficult.

• Must adhere to a strict budget, and if financial situation improves, you must pay more towards your debts.

Give 2 functions of money

• Unit of account

• Means of exchange.

Give 2 advantages for a consumer of paying for purchases using a contactless card

• Don’t have to remember a pin.

• A quick method, takes less time than inserting your card and entering your pin.

Give advantages of using a cheque to buy goods.

• Money stays in account longer as it takes 3 days to clear.

• Don’t need access to internet meaning goods can still be bought if there is no internet access.

Explain advantages of using hire purchase to buy a car (or item)

• Own asset after the final instalment, better than a lease as they must keep making monthly repayments.

• Low deposit, can get the car quicker as you don’t need to save up.