What is the Bank of England?
It's the UK's central bank.
Advantages of the Bank of England
- responsible for UK's financial stability
- interest
... [Show More] rate designed to achieve stable economy
Disadvantages of the Bank of England
- increase in interest leads to expensive borrowing
- members of public cannot access it
What is a bank?
It is a financial institution licensed to receive deposits and make loans (owned by shareholders).
Advantages of banks
- offer a range of services and account types
- provide a secure place to store money
- pay interest on credit balances (and charge high rates on borrowing, leading to increased profits)
Disadvantages of banks
- savings only protected up to £85,000
- may charge for certain accounts (premium account)
- profit-making organisation (makes the cost to individual higher)
What is a building society?
It is a financial institution that provides banking and financial services to its members (account holders).
Advantages of building societies
- a secure place to store money
- costs kept down (due to being owned by members)
- pay interest on credit balances on most accounts
Disadvantages of building societies
- savings only protected up to £85,000
- lack business drive (not for maximising profits, local, for the needs of people)
- may not give quality deals compared to banks
What are credit unions?
They are financial cooperatives owned and run by their members.
Advantages of credit unions
- secure places to store money
- not for profit organisation (cost kept down)
- offers additional services
Disadvantages of credit unions
- savings only protected up to £85,000
- lack of business drive (no profit interest)
What is the National Savings and Investment (NS&I)?
It's a state-owned savings institution in the UK.
Advantages of NS&I (National Savings and Investment)
- offers additional services (methods of savings)
- government backed, therefore 100% security on savings
Disadvantages of NS&I (national savings and investment)
- rates are variable
- required notice on withdrawals
- not easy to access (lack of street presence)
What are insurance companies?
They are businesses that offer customers protection against loss in exchange for a premium (e.g. car insurance, travel insurance).
Advantages of insurance companies
- protect against unexpected losses
- offer security and peace of mind
- planning easier (regular monthly payments)
- wide range of services (suit individual's needs)
Disadvantages of insurance companies
- premium assessed on estimated degree of risk (no guaranteed financial benefit)
- profit-making organisation (premium charged)
What are pension companies?
Businesses that sell policies to customers allowing them to save into personal pension schemes in preparation for retirement
Advantages of pension companies
- structure to help plan for financial security (after retirement)
- experts employed to make investment decisions
Disadvantages of pension companies
- poor investment may result in poor saving (for later life)
- money invested cannot be repaid prior to the arranged dates
What are pawnbrokers?
Businesses (and individuals) that offer secured loans to people with personal assets used as collateral (e.g. jewellery)
Pros of pawnbrokers
- quick way of acquiring cash for a short period of time
- no interest charged
- asset can be bought back within a set period of time
Cons of pawnbrokers
- amount given substantially lower than the actual worth of the asset
- if money not repaid within the time period the asset will be sold
What are payday loans?
Type of short term borrowing, where you borrow a small amount of money at very high interest rate
Pros of payday loans
- quick way of acquiring cash
Cons of payday loans
- very high interest rate
- pay back higher amount compared to what initially borrowed
- easier to get into a deeper debt
Types of banking
- Branch
- Online banking
- Telephone banking
- Mobile banking
- Postal banking
What is branch banking?
Customers visit the bank personally to carry out transactions
Pros of branch banking
- face-to-face contact, develop trust and security
- transactions done immediately
- can offer additional advice and services
Cons of branch banking
- time-consuming (e.g. travelling to the branch, queues)
- restricted opening hours (difficult for people with busy lifestyles)
What is online banking?
A banking method that allows customers to manage their account electronically through internet.
Pros of online banking
- 24/7 (easy, quick, convenient)
- access anywhere
- higher privacy (due to no personal contact)
Cons of online banking
- initially it can be time-consuming (setting and applying for it)
- no extra advice (due to no personal contact)
- increased risk of cybercrime (hacking)
- limited facilities (e.g. no cheques, cash withdrawals)
- not suitable for everyone (e.g. no access to internet)
What is telephone banking?
A banking method which allows the consumer to conduct transactions by telephone
Pros of telephone banking
- talk directly with advisor
- easily carry out simple transactions
Cons of telephone banking
- potentially time-consuming (e.g. on hold, waiting line)
- not 24/7
- limited service (e.g. no cheques)
- risk of identity fraud (theft)
What is mobile banking?
Customers manage their accounts through mobile devices (e.g. smartphones or tablets).
Pros of mobile banking
- 24/7 (easy, quick, convenient)
- instant transaction (time effective)
- privacy maintained
Cons of mobile banking
- no extra advice (due to no personal contact)
- need internet banking beforehand
- hacked easily (if phone stolen)
- not suitable for everyone
What is postal banking?
The provision of financial services via the postal service.
Pros of postal banking
- 24/7
- accessible in remote areas [Show Less]