The ABCs of Checking Accounts
By now, you’ve probably had a savings account and are hopefully putting money into it each month. As you get
older, especially once you start working, you’ll need to think about opening a checking account.
About Checking
When you start earning money, a percentage (however small)
should go into your savings account first. What you’re left with
can go into a checking account to help you pay for any expenses
you might have. With a checking account you can use an ATM
(automatic teller machine) card, debit card or checks to take the
money out of it – or there’s always cash!
Be Careful
But be careful! You need to keep track of everything going in and
coming out of your account or you could spend more than you
have and overdraw your account. Your credit union or bank calls
this “insufficient funds” and you’ll end up paying extra fees each
time to you go over.
Create a Plan
Depending on your situation, you might be able to set up what’s
called overdraft protection where you pay less in fees or
sometimes no fees at all. Some places even let you set up an
alert that emails or texts you when your account falls under a
certain amount so you won’t overspend. Whichever you choose,
just make sure you put a plan in place!
The Truth about Credit Cards
When you first learn about credit cards, they seem almost magical. You get a little
piece of plastic and then get to spend money you don’t have. Unfortunately, many
people – even grownups – don’t think past this point. And that can land you in big
trouble.
The Extras
What many people overlook about
credit cards until it’s too late are all
of the extras you have to pay. You
have to pay extra when you’re late
making a payment, when you spend
too much and when you don’t pay off
the whole amount you spend each
month – that’s called interest.
The Limits
When you get a credit card the company tells you how much you can spend total on
that card. That’s called your credit limit. And each month, if you don’t pay off the
complete amount you owe (the balance), the credit card company tells you what’s
the least amount you can pay – that’s called your minimum payment.
The Cost
Let’s say you want your parents to buy you a new pair of expensive jeans for $100.
They don’t have the cash right now and you ask them to charge it. You know what
those jeans will really cost? If their credit card interest rate is 18% and they only
pay the minimum amount each month, those jeans will end up costing close to $10
extra!! So, next time you go clothes shopping with your parents, you might want to
think twice before you ask!