personal finance

functions of money

unit of account, means of exchange, store of value, legal tender

unit of account

it allows us too place a monetary value on goods and services, the price of goods and services show the unit of account, eg a chocolate bar is 60p

means of exchange

it allows us to trade, businesses and customers can buy and sell goods and services using money

store of value

it allows us to use it in the future as it keeps its value. you might have money saves in a bank which you can then use to buy goods and services in the future.

legal tender

it is legally recognized form of payment. money is widely recognized and used for all sorts of transactions

store card

allows a customer to buy on credit in a particular store or group of stares, a minimum payment is required each month upon receipt of a statement.

May reward frequent shopper, additional benefits such as events or discounts, can chose how much to pay each month above a minimum amount.

May encourage debt, interest will be charged on balances not paid off at the end of each month

credit card

make purchases on credit i.e. buy now pay late. Repayments are made following the issue of a statement with a minimum amount.

Allows you to defer and spread payment, widely accepted, used online or in store.

 Interest is charged on the outstanding balance, can encourage overspending.

standing order

permission given to the bank to make regular payments, of a set amount, to a third party upon request.

Secure method of payment, ensures regular payments are not missed.

Money taken regardless of balance, must be reset or cancelled if anything changes

charge cards

allows for purchases to be paid on a credit card but the total amount is automatically paid direct from a bank account upon receipt of a statement each month.

Secure method of payment, avoids long term debt.

May incur annual or monthly fees, has to be paid in full regardless of funds

prepaid cards

a cash balance is held on a card which them reduces each time a transaction takes place e.g. oyster travel card or school lunch card.

Can only spend up to the amount uploaded, secure method of payment, can only be used for specific purpose.

Can be difficult t monitor balance, can be used by others with out permission, may involve a fee to purchase

electronic transfer

online transfer of money from one account to another.

Quick method of payment, transfer is almost instant, can be done remotely e.g. by mobile app.

Needs to be carefully set up to ensure the transfer goes to the right place.

direct debt

permission given to make to make regular payments to a third party upon request.

Ensures regular payments are not missed.

Amount taken will vary making budgeting difficult, need to be reset up if bank details change, taken automatically.

clearing house automated payment systems (CHAPS)

same day transfer of funds from one bank account to another.

Quick, but time frames vary, secure, avoids handling cash, sending cheques etc..  

May incur additional charges per transactions, must make sure details are correct.

cheque

a paper transaction giving a bank permission to transfer payment from your account to another account. Now largely seen as old fashioned.

Secure method of payment, widely accepted, appropriate for postal transactions.

Maybe charged for each cheque processed, costly if cheque is not honored due to insufficient funds

mobile banking

making transactions using a mobile phone or other potable devices such as a tablet. Convenient, increasingly popular. Still developing relies upon the customer having a mobile device

faster payment services

direct transfer of money from one bank account to another, guaranteed within 2 hours but may be quicker.

Quick but time frames vary, secure , avoids handling cash, sending cheques etc..

May incur additional charges per transaction, must make sure details are correct

cash

notes and coins.

Confident, widely accepted, small denominations, easy to control expenditure.

Risk of loss or theft, physical transactions only, inappropriate for large items of expenditure.

bankers automated clearing services (BACS)

direct transfer of money from one bank account to another, may take a few days.

Quick, but time frame var, secure, avoids handing cash, sending cheques etc.

may incur additional charges per transaction, must make sure details are correct.

debit card

allows you to make purchases by card with the money being taken directly from a current account.

Used to withdraw cash. Secure, widely accepted, can withdraw cash from various places.

Need to monitor spending and bank balance, if overspend cam be costly.