Why have a (regular) checking account? To make purchases To pay bills You can write as many checks or make as many withdrawals as you want/need to. NOTE: There may be monthly fees. Some banks exempt the fees if you have direct deposit for your payroll check.

Checking Account Fees Monthly service fee – also called a maintenance fee Per check fee Check printing fee ATM-Use fee Overdraft fee – also called nonsufficient funds fee (NSF) Return deposit fee Stop-payment fee Phone inquiry fee Fee for helping you balance your checkbook Transfer fee (between accounts)

What are the benefits of a (regular) savings account? To save for specific purchases (short-term) because it pays very low interest. Not a good way to make money but is safe and easily accessible. May incur fees for too many withdrawals, etc. Varies from bank to bank.

Annual vs. Daily Compounding Annual Compounding $1000 @5% compounded annually $1,000 at the end of the first day $1,050.00 (End of Year 1) Daily Compounding $1000 @5% compounded daily $1,000.14 at the end of the 1st day On the second day add the interest earned and compound the total amount $1,000.14 @ 5% daily $1,051.27 (End of Year 1)

Compound Interest 5 YEARS 10 YEARS No Interest $1,000 Annual Compounding at 5% $1,276 $1,629 Monthly Compounding at 5% $1,283 $1,647 Daily Compounding at 5% $1,284 $1,649

Saving $1 a day Saving $5 a day Saving $1 And $5 A Day Saving $1 a day Saving $5 a day No Interest 5% Daily Compounding Year 1 $365 $374 Year 5 $1,825 $2,073 Year 10 $3,650 $4,735 Year 30 $10,950 $25,415 No Interest 5% Daily Compounding Year 1 $1,825 $1,871 Year 5 $9,125 $10,366 Year 10 $18,250 $23,677 Year 30 $54,750 $127,077

Checking for Understanding On a savings account, would you want the interest you earn to be compounded daily, monthly, quarterly, or annually? On a loan or credit card, would you want the interest you owe to be compounded daily, monthly, quarterly, or annually?

Tips When Shopping for a Credit Card Decide how you will use the credit card and what you will purchase with it. Start small. Don’t charge too much on your credit card until you get comfortable with the monthly bill. Shop around for the plan that best fits your needs. Make sure you understand the terms of the plan before you accept the card. Read the fine print. (applies to loans too!) Beware of introductory rates. You might start out with a credit card that has no annual fee for the first year, but you will be charged a fee in the second year. You might start out with a low interest rate and then find the interest rate is much higher after a few months. Beware of credit card issuers who require application fees. Most credit card issuers don’t charge fees to open accounts. Make sure you understand the implication of fixed and variable rates. Fixed Rate – the interest rate stays the same Variable Rate – the interest rate might change anytime

The cost of having a credit card Fees – money charged by a financial institution to review your application for credit or to service your credit account Examples: Maintenance fees Service charges Late fees Over-the-credit limit fees

Debit Card The use of a debit card seldom improves your credit score. Why not? Debit cards – do not really improve your credit rating because they do not impact your debt

Credit/Debit Card Protection Always know where your cards are and keep a list of your account numbers and the phone numbers of your banks and card companies in a safe place. Save your receipts and check them against your account statements. If you see charges you did not make, report them immediately. Update your credit card information if you move. Destroy your old credit card when you receive a new or replacement card. Contact the bank or financial institution/store that you got your credit card from as soon as you realize your card is lost or stolen or when there are charges you did not make!

It’s important to know that: Failing to pay off a credit card balance quickly can lead to a decrease in one’s standard of living. A good credit score can help you get a good rate on a mortgage, a car loan, or a credit card. The Annual Percentage Rate (APR) is the best indicator of the cost of a loan. APR is the interest rate that shows what a borrower is actually paying with all the costs of financing factored in. If you plan to keep a balance on your credit card, you want to look for a low APR. Compound interest on a loan/credit card can increase your debt! Credit cards – allow you to delay payment; can lead to debt!