business - unit 3 Btec > LOB > Flashcards

LOB Flashcards

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1
Q

What is a financial institution

A

A company engaged in the business of dealing with financial and monetary transactions such as deposits .

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2
Q

What are the types of financial institutions ?

A

Bank of England
Banks
Building societies
Credit unions
National savings and investments
Insurance companies
Pension companies
Pawnbrokers
Payday loans

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3
Q

What is the bank of England

A

The UK’s central bank for UK that ensures the financial stability. It sets interest rates that help to control inflation .
They print bank notes (£5, £10, £20, £50)
They store over 400,000 gold bars and other foreign currency reserves to help support the UK financial system.
It is not like a commercial bank and doesn’t lend to the public.

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4
Q

What is a bank

A

A bank handles financial transactions and stores money on behalf of the public. They allow individuals and businesses to make payments, access credit, and saving.

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5
Q

What is a building societies

A

they provide financial services to the public such as day to day banking, mortgages and credit.
The key difference is they are owned entirely by their members (customers) which means they can set rates that benefit their members and not shareholders.

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6
Q

What is a credit union

A

A member owned not-for-profit financial co-operative, controlled by its members and operated on the principle of people helping people, providing its members savings, loans, and other financial services at competitive rates as well as other financial services.

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7
Q

What is a NS&I

A

a government-backed savings organisation. It offers savings and investment products to the public, and the money people save with NS&I is used to help fund government spending.
Government backed means money is 100% safe – unlike other banks that are protected to £85k
Savings products include:
Premium Bonds(chance to win tax-free cash prizes instead of earning interest)
Income Bonds
Direct Saver
Junior ISA
Green Savings Bonds(supporting environmental projects)

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8
Q

What is an insurance company

A

a for-profit business that helps people and organisationsprotect themselves against financial loss. You pay them a fee (called apremium), and in return, they agree to pay out money if something bad happens

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9
Q

What is a pension company

A

help peoplesave money for retirement. They manage pension funds and invest the money, so it grows over time.
You pay into apension schemeduring your working life.
The companyinvestsyour money to increase its value.
When you retire, you get regular payments (like a salary) from your pension.
There are different types:workplace pensions,private pensions, andstate pensions(from the government).
Why It Matters:
Helps you havefinancial securitywhen you stop working.
The earlier you start saving, the more money you’ll have later.

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10
Q

What is a pawnbroker

A

short-term loansin exchange for valuable items (like jewellery, electronics, or watches).
You give them an item ascollateral(security).
They lend you money based on the item’s value.
If you repay the loan (plus interest), you get your item back.
If not, theysell the itemto recover the money.
Why It Matters:
Can be a quick way to get cash, but it’sriskyif you can’t repay.
Often used by people who don’t qualify for bank loans.

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11
Q

What is a payday loan

A

very short-term loans, usually until your next payday.
Loans are small but come withvery high interest rates.
Easy to get, but expensive to repay.
If you don’t repay on time, the debt can grow quickly.
Can be useful in emergencies, but they’recontroversialbecause they can trap people in debt.
The government has placedstrict ruleson them to protect borrowers.

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12
Q

What are the advantages of the bank of England

A

Protect the financial stability of the UK economy
Lend to banks
Set interest rates

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13
Q

What are the advantages of banks

A

Secure place to store money
Pay interest on savings
Variety of services

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14
Q

What are the advantages of building societies

A

Owned by members
Variety of services
Pay interest on savings
Safe place to store money

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15
Q

What are the advantages of credit unions

A

Variety of services
Owned by members
Offer additional benefits to the community and charities

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16
Q

What are the advantages of NS&I

A

Savings are 100% secure as it is Government backed
Various ways to save such as premium bonds

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17
Q

What are the advantages of insurance companies

A

Protect against unexpected losses/events
Cover available on a variety of things
Pay monthly so easier to budget

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18
Q

What are the advantages of pension companies

A

Structured way to plan for retirement
Matched contributions by employer
Tax benefits

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19
Q

What are the advantages of pawnbrokers

A

Quick way of acquiring short term cash
Interest not charged
Buy back pawned asset

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20
Q

What are the advantages of Payday loans

A

Quick way of acquiring cash in a short period of time

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21
Q

What are the disadvantages of the bank of England

A

Do not lend to the general public
Can raise interest rates making borrowing such as mortgages more expensive

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22
Q

What are the disadvantages of banks

A

Savings only protected to £85,000 if the bank goes bankrupt
Owned by shareholders therefore are designed to make a profit

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23
Q

What are the disadvantages of building societies

A

May lack the business drive of commercial banks as banks are profit driven
Savings only protected to £85,000

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24
Q

What are the disadvantages of credit union

A

May lack the business drive of commercial banks as banks are profit driven
Savings only protected to £85,000

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25
What are the disadvantages of NS&I
Variable rates Lack a high street presence Usually need to give notice on withdrawals
26
What are the disadvantages of insurance companies
Premiums assessed on risk and the higher the risk the higher the premium Owned by shareholders therefore need to make a profit
27
What are the disadvantages of Pension companies
Poor investment decisions may mean a poor return on investment Cannot access money until the agreed term
28
What are the disadvantages of pawnbrokers
Amount given for the asset is much lower than its worth Asset will be sold on if loan is not repaid
29
What are the disadvantages of Payday loans
Interest charged is very high which results in the amount being paid back being substantially higher
30
What are the methods of communicating with customers
Branch Online banking Telephone banking Mobile banking Postal banking
31
What is branch communication
a physical place where transactions are carried out face to face. Customers visit the bank to carry out their banking needs. This could be using self service machines or seeking advice from an employee at the bank
32
What is online communication
allows customer the opportunity to manage their banking needs over the internet on a laptop or computer. They can do many of the same things that can be carried out in branch, however online does have its limitations as money cannot be paid in or drawn out.
33
What is telephone communication
Customers carry out banking transactions over the phone.
34
What is mobile communication
the service is accessed via a mobile device such as a smartphone or tablet
35
What is postal communication
Paper based financial transactions. Many banks still send out paper copies of statements and some customers may still pay their bills by cheque.
36
what are the advantages of branch
Ability to build relationships Encourages brand loyalty Additional services can be offered A method that customers have confidence in Transaction are carried out there and then
37
what are the advantages of online
Extremely convenient 24/7 access Private
38
what are the advantages of telephone
No additional charges Convenient
39
what are the advantages of mobile
Convenient Easy to use Available 24/7
40
what are the advantages of postal
Traditional method that customer feel comfortable with No additional technology required
41
what are the disadvantages of branch
Only available during opening hours Takes considerably longer Need to travel to a branch Additional costs involved such as; fuel, parking, public transport etc.
42
what are the disadvantages of online
Cannot withdraw cash Possibility of being a victim of cyber crime May have limited facilities Takes time to register and set up
43
what are the disadvantages of telephone
Only available during set hours Limited service provided Automated services can annoy customers Risk of fraud/identity theft
44
what are the disadvantages of mobile
May need to download an app Higher risk due to possibility of losing mobile device Possibility of being hacked
45
what are the disadvantages of postal
Post can be lost Takes significantly longer than other methods
46
What is consumer protection
an important aspect of personal finance that ensures individuals are treated fairly and safely when buying goods and services
47
What is the financial conduct authority (FCA)?
The FCA is an independent organisation that is the conduct regulator for 59,000 financial services firms and financial markets in the UK. It is funded via fees charged to the financial service providers and their work focuses on 3 key areas: Authorisation Supervision Enforcement
48
What is the financial ombudsmen service (FOS)
Appointed by the government to protect and represent consumers who are in disputes with financial service providers. They only get involved if these disputes cannot be settled between the financial provider and the consumer. Funded by compulsory fees charged to all regulated financial institutions.
49
What is the financial services compensation services
Set up by parliament in 2001 to protect customers of financial companies that have gone out of business, to compensate customers for financial loss
50
What is Consumer Credit?
When you borrow money to buy now, pay later. You’re using consumer credit – like Loans, credit cards, or store finance
51
What is FCA ( financial conduct authority)
Regulates lenders and makes sure that they: Offer Credit responsibly Check if you can afford repayments Provide clear and fair information Don’t use aggressive tactics if you fall behind on payments
52
What is credit reference agency
Lenders check your credit score before approving your credit Your rights: See your credit report Correct mistakes on your report Add a note explaining missed payments
53
What is unfair relationship
If a credit agreement is unfair, the courts can: Cancel or change the agreement Reduce how much you owe Order refunds Applies to: Extremely high interest rates Hidden Charges Unclear terms
54
Why do consumer credit laws matter?
Make informed choices Borrow safely Stay protected from unfair lenders Avoid debt traps
55
What is citizens advice
A charity run organisation that provides advice on a range of financial and nonfinancial issues. This can be done via a face-to-face appointment, over the phone or online. Financial advice covers areas including, debt, benefits, banking, pensions and insurance, consumer protection
56
What is independent financial advisor
Professional individuals who provide independent advice and guidance on a range of financial products such as; mortgages, pensions, insurance and investing. They must be qualified and are regulated by the UK government.
57
What is price comparison website
Price comparison sites do exactly what their name implies as they compare the price of goods and services from a range of companies. This allows you to make sure you get a deal that's tailored to you at the best price.
58
What is debt counsellors
Debt counselling is a professional service that offers independent advice. It is a common process that is used to help individuals with debt settlement through education, budgeting and the use of a variety of tools with the goal to reduce and ultimately eliminate debt
59
What is individual voluntary arrangements
An Individual Voluntary Arrangement (IVA) is an agreement with your creditors to pay all or part of your debts. You agree to make regular payments to an insolvency practitioner, who will divide this money between your creditors. An IVA can give you more control of your assets than bankruptcy.
60
What is bankruptcy
Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions bankruptcy is imposed by a court order.
61
What are the advantages and disadvantages
61
What are the advantages and disadvantages of citizen advice
Advantages - Free,Covers a wide range of areas,Face to face, online & telephone Disadvantages - Trained volunteers not professionals, Knowledge in finance may be limited
62
What are the advantages and disadvantages of IFA
Advantages - Advice is offered by professionals Regulated by FCA, Advice based on individual need and circumstance, No commission from financial institutions Disadvantages - Charge fees, Dependant on the quality of the advisor
63
What are the advantages and disadvantages
64
What are the advantages and disadvantages Price comparison website
Advantages - Access 24/7, Free Additional Incentives, Easy to compare Disadvantages - Could be bias, does not always cover all providers
65
What are the advantages and disadvantages debt counsellors
Advantages - Professionals who specialise in debt, Regulated by the FCA and FOS Disadvantages - It isn’t free, Just focuses on debt
66
What are the advantages and disadvantages IVA's
Advantages - Help manage debts via regular payments, Unbiased as advice is independent Disadvantages - Fees are charged for the service, Impact on credit rating
67
What are the advantages and disadvantages of bankruptcy
Advantages - Suspends any debt collection, Debts are usually fully written off Disadvantages - May get all assets repossessed, Stays on your credit report for 7 to 10 years, Difficult to borrow in the future
68
What are the similarities and differences between bankruptcy and IVA's
Features bankruptcy IVA Control: Court-led process Negotiated agreement Asset Risk: Assets may be sold Assets usually protected Duration: Typically 1 year Typically 5–6 years Cost: Court fees apply Practitioner fees included in payments Stigma: More public More private (published in insolvency register) Employment Impact: May affect Less likely to affect employment certain jobs (e.g., legal, financial roles) Eligibility: No minimum debt level Usually requires at least £5,000 debt and multiple creditors
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