Guide to Personal Banking
At first glance, banking can seem intimidating, especially when you’re introduced to all the options available to you. But once you’re informed, it’s actually not complicated. The most important thing to keep in mind is to be responsible with your finances. Here are some ways to get started:
1) Savings Account:
With a savings account, you deposit your money and earn interest over time. Interest is what the bank pays you so they can use your money when they fund loans for others.
Don’t worry though - the money never leaves your account, and it is always available when you want to access it. Banks pay you an interest rate for your account and then are paid back at a higher rate when they collect on a loan.
For those who would rather take their chances hiding money around the house, remember it’s not insured. You could be robbed or your home could burn down. Banks store your money in a locked and fireproof safe and insure your money up to $100,000 through the FDIC.
2) Checking Account:
Here, you place money in the account like you would a savings account. When you need money to buy something, you pay for it by writing a check or using a debit card. A debit card is like a credit card, only tied to your checking account. Whatever amount you charge on it is then taken out of your account.
You can also withdraw money with an ATM card. This, too, is like a credit card, but it’s only accepted at ATM machines. You insert it and are given the amount of money you ask for. Take care though not to overdraw your account, or spending more than you have.
3) CD (Certificate of Deposit):
CDs are savings accounts that last for six months or a year, depending on the terms. You not only earn interest on what you deposit, but also the interest acquired. However, you can’t take the money out until the term finishes.
4) Christmas Club Account:
This is a special type of savings account. As the name suggests, the money deposited here is to be used at Christmas. People put aside funds during the year and collect it around October or thereabouts. Think piggy-bank for adults.
5) IRA:
This is commonly referred to as a retirement account. You can deposit up to a certain amount of money every year, TAX-FREE. The funds remain untouched until you reach retirement age, otherwise you’ll have to pay penalties and other fees.