Banking
Credit vs Debit
A credit card is a plastic or metal card that allows you to purchase goods with a line of credit from the issued bank or company. After you purchase an item, you are given 30 days to pay it back without interest or you have to pay the cards interest rates, which can approach 25% a year. A debit card is a card where instead of having a line of credit, the money comes straight out of your bank account. You have to have sufficient funds in your bank account to complete the transaction. There are advantages to using a credit card; it helps build up your credit score. By using a credit card you can participate in reward systems, such as cash back or points/miles you can use towards purchases. Although there are benefits of using a credit card, there is always a danger of going into card debt.
Savings vs Checking
A savings account gains interest, but you normally don’t make frequent withdraws. The 20% of your paycheck that you decide to save (as discussed in our budgeting post) will go into your savings account. Over time, this account gains interest (roughly 1.5%). For example if you save $200, after one year your balance will be $203. This is compared to a checking account, which is used to write checks and generates 0% interest. If you write a check when the account doesn’t have money, the person cashing the check and you both have to pay a fee to the bank typically $25 for each side. This is called bouncing a check. This is why it is important to have control of your finances.
How to Bank
When going to an ATM, you have to input your bank card. After you enter in your pin (that you set up when you first got a debit card), you are then presented with two options: deposit or withdraw. Deposit is where you put money into your account, while withdrawal is taking money from your account. When withdrawing, you can only take out a certain amount of money depending on the ATM. Also, you have to pay a fee if the ATM you're using is not owned by your bank. It is always recommended to use an ATM that is owned by your bank to avoid having to pay fees.
It is also possible to bank online now through your bank’s website or app. You can even deposit a check on your phone.
