Banking

Revise Banking for Commerce 7100 (O Level) — revision notes, 128 practice questions and instant AI marking.

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Cambridge O Level Commerce 7100

Banking

The big idea: Banks look after money, move it, and lend it. A business or consumer chooses the account, the way to pay and the type of borrowing that fits the situation, and more and more of this now happens on a phone rather than in a branch.

Summary — What This Chapter Covers

Accounts: a current account for day-to-day payments and a deposit/savings account that earns interest.
Customer services: ATM, night safe, foreign currency, financial advice and telephone banking.
Payments: cash, cheque, credit card, debit card, store card, credit transfer, standing order, direct debit, electronic transfer and documentary credit (letter of credit).
Sources of finance from banks: loan, overdraft, mortgage and hire purchase. Interest is the cost of borrowing.
Choose the service that fits the situation: amount, how often, how quickly, how safely, and how long the money is needed for.
Digital banking (internet and mobile banking) has advantages and disadvantages and is leading to branch closures, more digital-only banks and a move towards a cashless society.

1. Bank Accounts and Customer Services

Syllabus 5.2.1 · Papers 1 & 2

Where money is kept and how the bank helps

	Current account	Deposit / savings account
Purpose	Day-to-day receipts and payments	Saving money that is not needed now
Interest	Little or none	Earns interest
Payments	Debit card, cheque book, standing orders, direct debits, transfers	Usually no cheques or cards for payments
Withdrawals	At any time	Notice may be needed, or interest is lost
Overdraft	Can be arranged	Not available
Suits	A business paying suppliers and wages; a worker receiving a salary	A business saving for new equipment; a person saving for a deposit on a house

Customer service	What it does	Who benefits
ATM (automated teller machine)	Cash withdrawals, balance enquiries, deposits and mini-statements at any time, away from the branch	Customers needing cash outside opening hours
Night safe	A secure slot in the bank wall where a business deposits the day’s takings after the bank has closed	Shops and restaurants that close late, so cash is not kept on the premises overnight
Foreign currency	Exchanging money into other currencies	Importers paying overseas suppliers; travellers
Financial advice	Advice on saving, borrowing, investing, starting a business and paying tax	New businesses and people planning for the future
Telephone banking	Checking balances and making payments by phone	Customers who cannot visit a branch

Worked example: a current account balance

A worker’s current account has an opening balance of $1,250. Calculate the closing balance after these transactions.

Details	Money in $	Money out $	Balance $
Opening balance			1,250
Salary received by credit transfer	1,800		3,050
Rent paid by standing order		650	2,400
Electricity paid by direct debit		95	2,305
Debit card payment at supermarket		340	1,965
Cash withdrawn at ATM		200	1,765
Closing balance			1,765

Closing balance = 1,250 + 1,800 − 650 − 95 − 340 − 200 = $1,765

Practice Question 1

A café owner puts $4,000 she does not need for a year into a deposit account paying 3% interest a year. Calculate the interest she earns in one year, and explain why she should not use a current account for this money.

2. Methods of Payment

Syllabus 5.2.1 · Papers 1 & 2

Ten ways to pay

Method	How it works	Best for
Cash
Cheque
Credit card

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Also in the full note

Loan, overdraft, mortgage, hire purchase
Internet banking, mobile banking and their impact
Fit the service to the situation

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Banking

Banking

Where money is kept and how the bank helps

Worked example: a current account balance

Ten ways to pay

Past papers that test Banking

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