Smart Money Training Program

Topic 6.2: Managing a Bank Account

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Learn the rules of your account and keep track of how you use it. This can help you keep costs down and develop a positive banking relationship. 

Using a Savings Account

Savings accounts are designed to save money for the future. They are not intended for frequent withdrawals.

You can use a savings account to build your savings by depositing money into the account and keeping it there to earn interest.

Using a Checking Account

Checking accounts are designed for frequent use, allowing multiple transactions such as depositing money, paying bills, making purchases, and accessing cash.

You can use a checking account to help manage your daily money management needs.  You should have your paychecks deposited into your checking account and then use the money in your checking account to pay all your frequently occurring expenses and bills.

When you open a checking account, you may get:

• Debit card: Also known as a bank or check card. When you use it, money is deducted from your account. It is not the same as a credit card or an ATM card.

• ATM card: Not the same as a debit card. It allows you to use an ATM for various transactions on your account. You might also be able to make some purchases with an ATM card.

• Checks: Documents you complete that tell your bank to pay money from your account to someone else, called the payee. Some checking accounts do not use checks, called "checkless accounts."

• Electronic Account: Username or other information on how to create an account for online and/or mobile banking.

Overdrafts

An overdraft occurs when a transaction is processed, but you do not have sufficient funds in your account to cover it.

Financial institutions offer programs to cover overdrafts caused by ATM and debit card transactions.

• Under federal rules, you choose whether to “opt-in” to a program that your financial institution may offer for overdrafts caused by routine debit card transactions and ATM withdrawals.

• If you opt-in: The financial institution may honor an ATM or debit card transaction that is more than your account balance. Please note that a fee will be charged to process each transaction. That could result in a $5 purchase costing you an extra $35 or more.

• If you do not opt-in: The financial institution will decline your routine debit card transactions and ATM withdrawals if you do not have enough money in your account to cover the withdrawal or purchase. The financial institution will not charge you an overdraft fee if the transaction is declined.

For checks and other types of payments, such as automated payments set up to pay bills, your financial institution chooses whether to cover a transaction that would cause you to exceed your balance.

• If the financial institution decides to cover the transaction, expect it to charge you an overdraft fee.

• If the financial institution decides not to cover the transaction, it may charge you a “non-sufficient funds” (NSF) fee, and the merchant may also charge you a returned check fee. These fees can vary, but fees of $30 or more are common.

Direct Deposit

Direct deposit allows your money to be safely and securely deposited into your account at a financial institution electronically. With this feature, you don’t have to worry about finding time to make deposits yourself.

Both automatic bill payment and automatic debit can help you stay on time with your bills. However, ensure you have sufficient funds in your accounts to cover the costs.

Automatic Bill Payment and Automatic Debit

• Automatic Bill Payment – Automatic bill payment lets you schedule and send payments electronically through your financial institution, one-time or on a recurring payment schedule.

• Automatic Debit – Another electronic payment option is to give permission directly to a company, such as a merchant or lender, to take payments from your bank account one time or regularly.

Automated Teller Machine (ATM) Cards

ATM cards allow you to use an ATM for various account transactions. Ask your financial institution if you can use your ATM card to make some purchases.

An ATM may allow you to:

• Get cash by making a withdrawal from your account

• Check your account balance

• Deposit money into your account by inserting cash or checks into an ATM

• Transfer money, such as moving money from your savings account to your checking account

• Make some payments

When you use an ATM that is not affiliated with your bank, you may pay a fee for some transactions. The ATM will notify you of fees and prompt you to accept them before you make your transaction. Get to know the locations of your financial institution's ATMs so that you can avoid paying fees. You can ask a representative of your financial institution for that information or see if the financial institution’s website includes a map or listing of ATM locations.

ATMs have various accessibility features. Explain what features you need in an ATM to your financial institution to learn how they can meet those needs.

Keep safety in mind. Thieves sometimes target ATMs. If anything about an ATM looks suspicious, avoid using it. Contact your bank immediately if you lose your ATM card, you are worried that others know your personal identification number (PIN), or you have other concerns related to your ATM card.

If your financial institution issues you an ATM card, you will not receive a debit card. You will receive one, but not both.

Debit Cards

A debit card allows you to do what an ATM card does, plus more. You can use a debit card, also known as a bank or check card, instead of cash to make purchases. You can also use it to get some money from an ATM.

“Person-to-Person” Payments (P2P)

Mobile applications, also known as apps, and other web-based services enable person-to-person money transfers. Typically, users link the mobile payment system to their bank accounts or credit card accounts and initiate transfers of funds to others who are also users of the same app or web-based service.

Using an app for peer-to-peer (P2P) payments is one way to handle everyday transactions with other people, such as paying a babysitter or reimbursing a friend for lunch. There are various P2P systems, and significant differences exist in their operational mechanisms. For example, you may be able to transfer money after logging into a website. Another option may allow you to transfer money by physically touching your phone to another person's phone.

Keep these things in mind if you are using P2P apps or thinking about them:

• Is it through a federally insured financial institution?

• Fees

• Privacy

• Funds availability

• Your rights and dispute resolution

Remember the Key Takeaways:

• Learn the rules of your account and keep track of how you use it.

• This can help you keep costs down and develop a positive banking