From an early age, Jack has been putting his money into a bank deposit account. He is now 18 and has started a job as a mechanic. He wants to open a bank current account.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2020). The mark or mark type is shown in brackets.

1. [1] A deposit account is used to save money / for later use / limited withdrawals; [1] whereas a current account is used for everyday transactions
2. [1] A deposit account earns interest; [1] whereas some current accounts earn no / low interest
3. [1] A deposit account is likely to require notice for a withdrawal; [1] whereas a current account requires no notice of withdrawal
4. [1] A deposit account does not charge any fees; [1] whereas a current account has bank charges
5. [1] A deposit account does not allow the customer to spend more than their balance; [1] whereas current account allows overdrafts
6. [1] A deposit account has lower minimum opening amount than a current account or allow use of figures = (2 marks)
7. [1] A deposit account does not receive bank statements; [1] whereas current accounts bank statements are given
8. [1] A deposit account does not allow setting up payments such as standing orders / direct debits / cheques; [1] whereas a current account allows payments such as standing orders / direct debits / cheques.
9. [1] At ATM / cashback provider
10. [1] with a credit / debit card / PIN / 24/7
11. [1] Direct debit
12. [1] enables variable / fixed amounts / variable / fixed intervals to be requested.
13. [Yes 1] can access your accounts from anywhere / at home; [1] at any time; [1] more convenient; [1] no need to visit a bank; [1] stand in a queue / saving time; [1] can transfer funds / pay bills; [1] check transactions; [1] check account balance; [1] more secure than internet banking
14. [No 1] network access might be unavailable; [1] e.g. in rural areas; [1] the bank's system might be down so no access is possible; [1] hackers may get into the bank's system and steal Jack's money / data could be taken; [1] loss of phone gives access to bank details; [1] will not be able to obtain all bank services e.g. mortgage; [1] some banks charge a fee for mobile banking.
15. [1] Buy now and pay later / paying for goods later / a form of borrowing.
16. [Up to 2 marks] for describing hire purchase
17. [Up to a further 2 marks] for analysing the suitability of hire purchase to Jack
18. [Up to a final 2 marks] for evaluating how suitable hire purchase is for buying the motorbike.
19. Hire purchase is an arrangement whereby a customer agrees to a contract to acquire an asset by paying an initial instalment and repays the balance of the price of the asset plus interest over a period of time
20. Using hire purchase, Jack will pay a deposit / down-payment to purchase the motorbike and then make regular monthly instalments / repayments, usually over a one to five-year period, until the total is paid. This will help with his cash flow
21. Interest will be added to the selling price of the motorbike to cover the length of time Jack will take to pay the total amount. So hire purchase is more expensive than paying in cash
22. Although Jack can use the motorbike, he will not own the motorbike until he has paid his final monthly instalment
23. The motorbike will be repossessed if he does not make the regular repayments
24. The goods cannot be sold until the payments have been completed
25. Hire purchase finance is usually provided by a third-party lender and an application form will have to be completed and credit checks made. As Jack is only 18 and just started work he may not be able to prove his creditworthiness. Although the fact that Jack has a regular income and that he has been saving regularly may help him to get hire purchase.
26. Evaluation: It would be cheapest for Jack to buy the motorbike with his savings, if he has enough saved, because it would not cost him any extra in interest and he will own the motorbike immediately.