Module 1: Understanding the importance of managing personal finance

Different ways to pay

You can spend your money in a number of different ways and each has its advantages and disadvantages.

You can see their features, pros and cons in the table below.

Payment method	Feature	Advantages	Disadvantages
Cash	Coins and notes in different currencies.	Easy and accessible.	Can be heavy to carry around. Risk of theft or loss.
Debit card	A card that allows you to use money from your bank account.	You can pay using money you have in the bank.	You can only spend the money you already have.
Credit card	A card that allows you to spend money and then pay it back.	You can buy goods without having to save for them. It also insures your purchase.	It is easy to overspend. The interest can be high if you don’t repay the entire balance.
Cheque	A written order to the bank to pay an amount to the account of the person/business you have purchased from.	It is a safe way to pay for goods.	It can be slow.
Electronic transfer	Money transferred directly to a person’s/business’ bank.	It is safe.	You must know the bank details of the person/business.
Direct debit	An order to pay a variable amount to a person or business each month.	You can arrange for bills to be paid automatically.	There must be enough money in the bank to cover payments.
Standing order	An order to pay a certain amount to a person or business each month.	It is a fixed amount, so you know how much money goes out of your account each month.	They lack flexibility if monthly payments change.
Prepaid card	A card that allows you to spend pre-loaded money.	It allows you to control your spending.	You must remember to put money on the card.
Contactless card	Any card (Debit/Credit or prepaid) that you can use without putting it into a machine.	It is easy and quick and doesn’t require a pin number.	It is easy to lose a stolen card.
Store card	A card that allows you to purchase goods from a store and repay monthly.	You can buy from the store even when you do not have money in the bank.	Must be repaid and can be expensive if not paid back promptly.
Mobile banking	Banking from a mobile phone/device.	It is convenient—the information is at your fingertips.	Risk of being affected by scams. Risk that people may access your information if you lose your device.
Bank-to-bank services (BACS, FPS and CHAPS)	Ways to deliver money from bank to bank in the United Kingdom.	It is safe.	BACS is slower than CHAPS but CHAPS has a higher cost.