Don't Break the Bank: A Student's Guide to Managing Money (14 page)

1. Enter the DATE in the blank in the upper right corner. Include the month, the day, and the year. You can write out the date as January 4, 201X—or you can use all numbers 01/04/1X.

2. Write the name of the person or company you are paying on the Pay to the order of blank. Get the spelling right.

3. To the right of the Pay to the order of blank is a blank with a dollar sign. Using numbers, write the amount in dollars and cents. Be sure to clearly place the decimal point between the dollar numerals and the cents numerals. For example: $32.15.

4. The next line is used to confirm the amount of the check, just in case your handwriting is hard to read on the dollar-sign blank. In clear handwriting, write out the amount using words and fractions. Write out the dollar amount. Then add “and” followed by the cents amount written as a fraction. Put the cents in the numerator’s position and 100 in the denominator’s position. For example: Thirty-two dollars and 15/100. If you have any room left, draw a line to the end of the blank so no one can add to what you’ve written on that blank.

5. The Memo line in the lower left hand corner is a reminder line and can help you stay organized. For example, if you are buying a pair of jeans and are paying by check, you can write “jeans” on this line. If you write several checks to the same place, like a department store, this line helps you identify which check paid for jeans, which check paid for shoes, and which check was used for socks and a sweatshirt. If, however, you are paying a bill to the electric or phone company, you may need to put your account number on this line.

6. The signature line, the line in the lower right corner of the check is where you write, not print, your name. Decide how you are going to sign your name, and then sign it the same way on all your checks. This is a formal document, so you probably want to sign it Andrew or Alexis rather than Andy or Lexi. Your bank will keep your signature on file as a way of verifying your signature on checks and other documents.

EXTRA INFO: At the bottom left corner of the check, you’ll see some numbers. The first set is the Routing Number. This identifies the bank the check belongs to—each bank has a unique number. The next set of numbers are your account number followed by the number of the check you’re writing, which should match the number in the upper right-hand corner.

What Does It Mean to Be Overdrawn?

      
Tip:
If you write an amount that doesn’t take up the entire “amount” line on the check, draw a line across the blank space, to prevent someone else from adjusting the amount.

When you write out a check that is more than the amount you have available in your account, this puts your account balance in the negative. This is called being overdrawn. Depending upon your bank’s policies, it will either honor the check (leaving your account in negative balance; you will need to deposit enough to cover the shortfall) or it will return the check to the person who tried to cash it. This is called a
bounced check
.

Regardless of whether the bank honors the check or not, it will probably charge you an overdraft fee. This can be as much as $40 or more. And it’s important to note that this is usually charged for each transaction. So, if you write out three checks that come in while your account is overdrawn, you will be charged three separate overdraft fees. Needless to say, these fees can really add up!

Tales from a Real Teen

“I have found that when you do overdraw, it doesn’t hurt to call your bank and talk them through your situation. If I ever overdrew, I would immediately move money from my savings to my checking and call my bank. Oftentimes, a bank can waive fees if you are able to prove good customer history. But you only can do this a few times a year. The same goes for credit card fees—it never hurts to ask if the card company will waive a fee.

      
~ College student, New York

Overdrawing your account is a huge bummer because it means that the account you wrote a check from had insufficient funds to cover the amount you said you were good for. Not only is this totally embarrassing, it also results in fees and charges that add up quickly. Generally, your bank will charge you at least $30, the payee (whoever you wrote the check to) will also charge you at least $25, AND you still owe the amount of money you wrote the check for. It is very important that you are aware of every instance of spending: your balance is how much is in your account, not how much you
would
have left after all of your checks have cleared. If you check your balance and it’s surprisingly (delightfully!) high, then be sure you’re taking all of the checks you’ve written into account. It’s not uncommon for young spenders to spend beyond their means because they simply are not remaining conscious of every cent they said they were good for.

Putting Things in Balance

One way to make sure you know exactly where your checking account stands is by balancing your checkbook. This means making sure your total, after all the transactions for the month, matches the current balance on your bank statement.

Here’s an easy step-by-step guide to balancing your checkbook from Practical Money Skills for Life at http://www.practicalmoneyskills.com/:

•
Step 1:
Get a copy of your monthly bank statement. These should be mailed to you each month. If you misplace a statement, you can ask for a replacement (usually for a fee) or get a copy online (usually for free). You may have already signed up for online bank statements and should be receiving e-mail or text notices from your bank when your statement is available.

•
Step 2:
Compare your statement to your checkbook register. Throughout the month, you should have been recording every deposit and purchase or withdrawal. If you see any charges or deposits on your statement that aren’t in your register, add them.

•
Step 3:
Record any fees or balance adjustments that may appear in your statement.

•
Step 4:
Subtract from your register’s balance any checks you have written but that have not yet cleared the banking system.

•
Step 5:
Check and see if the total matches your statement. If it does, your account is balanced. If not, go back through your register and see if you’ve missed anything or if you’ve made a mistake with your math.

“The
FDIC
—that’s short for Federal Deposit Insurance Corporation—is part of the U.S. government. The FDIC was created by Congress in 1933 after a terrible economic period called “The Great Depression” when thousands of banks shut down and families and businesses all across America lost money they had deposited in those banks. The FDIC’s primary job is to make sure that, if a bank is closed, all of the bank’s customers will get their deposits back—including any interest they’ve earned—up to the insurance limit under federal law. In the 70-plus years since the start of the FDIC, we have responded to about 3,000 bank failures, and we are proud to say that no depositor has lost a single penny of insured money.”

~ Courtesy of
FDIC Consumer News,
http://www.fdic.gov/sum_06_bw.pdf

BTW, You Can Use an ATM

When you have a bank account, you will often receive an ATM card (ATM is bank lingo for automated teller machine). An ATM card allows you to get your money from a machine 24/7, even if the bank is closed. You can also make deposits and do other banking at the ATM. In order to use your card at the ATM, you will need to enter your
PIN
, your private security code. Make sure you memorize your PIN, and don’t tell it to anyone. If you do, you run the risk that this person will be able to get your money if he or she gets a hold of your ATM card.

Warning:
Some ATMs charge you a fee to use the machine, especially if the ATM isn’t operated by the bank at which you have the account.

Debit or Leave It

      
Tip:
To impose a limit on how much you’re going to spend in a set period of time—a night, a weekend, a trip to the mall—try just taking out a set amount of cash from the ATM and setting that as your limit. That way, once you’re out of cash, you’re done spending. This ensures not spending more than you’re able to.

A
debit card
is like an ATM card with extra powers. A debit card lets you make purchases at stores and online. The debit card will usually have a Visa or MasterCard logo on it, so it may look like a credit card. However, there is one important difference: When you pay for something with a debit card, the money is taken right out of your checking account. So, you need to make sure you have enough money in your account to pay for whatever it is you want to buy. Otherwise your transaction may be declined or your account might become
overdrawn
.

Some things to consider with debit cards:

• They often have daily spending or withdrawal limits. So if you try to buy something that is more than that limit, your transaction may be declined, even if you have more than enough money in your account.

• The security protection rules may differ somewhat from credit cards. Be sure to review your bank’s policies online so you know what risk you may face should someone make unauthorized charges or purchases with your card.

• There is more risk involved, in that if someone gets a hold of your card or your account numbers, the person can take money right out of your bank account. (Yes, the bank may credit that amount back if you file a fraud dispute, but that could take some time.)

• For certain transactions, a debit card may not be acceptable. For example, some car rental agencies will not accept debit cards.

Chapter 6

Online Banking and Bill Paying

You do pretty much everything else online, so why not manage your money online? Many banks offer online banking—and, in fact, they often encourage people to use it. It saves the bank the time and expense of sending out paper statements and allows you to do a lot of transactions yourself without having to bother a teller or other bank employee. It’s more convenient for you because you can do your banking from the comfort of your own home, at any time of day or night. So it’s a win-win for everyone!

Advantages of Online Banking

Online banking offers some advantages when compared to going to an actual bank location to do your banking business. As we’ve already mentioned, it’s very convenient. You can access your account online from wherever you are (as long as you have an Internet connection, of course). You can do your banking at any time, day or night, and you don’t have to get in the car and drive anywhere, which saves you a lot of time. The transactions themselves are often done very quickly, as compared to standing in line at a bank and waiting for a teller.

Many people also find that it’s easier to keep track of their banking transactions and balances when they use online banking, because all of their activity is all recorded and available for review right there.

Also, if you use any sort of budgeting software program, it usually is designed to interact well with your online banking system.

Disadvantages

There are a few drawbacks with online banking. First, obviously, you aren’t dealing with an actual person, so you can’t ask questions. (Although most online banking systems do allow you to submit a question or get help, but it may take several hours or even a day or more to get an answer.)

Also, there may be some delay in when your transaction is processed or officially posted to your account. For example, transfers made after a certain time of day may not be posted until the next day. Be sure to check your bank’s site for details as to processing times.

Some people worry about security issues when banking online. We will discuss this more in this chapter.

Direct Deposit

Direct deposit
is when your paycheck or other payment is automatically deposited into your bank account. This is very convenient because you don’t need to worry about picking up your paycheck (or waiting for it to arrive in the mail) and then going to the bank to deposit or cash it.

Automatic Savings

If you want to help your savings grow without having to think about it too much, you can set up an automatic transfer. This is where a certain amount of money is automatically transferred from your checking account into a savings account on a specific date.