Banking basics: Consider your personal needs and invest accordingly

So you've never set up a banking account?

There are some basics to be aware of, such as the difference between banks and credit unions. Banks are for-profit companies owned by investors and shareholders. They are managed by a paid board of directors and accept anyone who wants to open an account. Credit unions are owned by members and managed by an elected, volunteer board of directors comprised of members. There are membership qualifications such as residency in a geographic area, membership in a local chamber of commerce, church, school district or other criteria.

Some institutions today operate online only – no bricks and mortar. Research how easy it is to interact with this bank or credit union before investing your hard-earned money there. Perhaps you want a financial institution that provides excellent customer service, but doesn’t make it easy for you to remove your money in an instant. Only you know what will work best for you.

What type of account should you have? Checking and shared draft accounts help you manage day-to-day spending and are easy to open. Bring in your ID and money for deposit; you will often get free checks and registers, a debit card, online banking services and other amenities.

Choose checking? Here are the basics

Remember that writing a check is a payable-on-demand contract. There must be money in the account to cover the promise you are making when signing a check. Whether you use a checkbook register, a ledger book or an app on your phone, keep a record of your spending and deposits. Errors can happen and it is always a good idea to check your balance regularly.

Be aware that online predators can also wreak havoc on banking accounts. Use a strong, secure online password, not easily guessed, and change it often. Never share your password with anyone!

Irresponsible banking behavior can result not only in big headaches for you and unnecessary overdraft fees but a smudge on your credit report and credit rating. This can impact everything from your ability to rent an apartment to being able to get a job.

Today’s employers often look at the big picture, and that includes checking a prospective employee’s credit and background to see if you will be reliable.

Some safety tips when writing checks:

• ALWAYS write in ink
• ALWAYS cover the full line provided
• Once endorsing a received check, anyone can cash it. Don’t endorse checks until you are ready to deposit them. For extra protection, write “for deposit only” and the account number under your signature
• Keep unused checks in a safe place. Lock them in a secure box or your luggage
• Check your bank statement each month – or more often online – for errors. Your institution must investigate if you challenge a problem and it is within their policy for time. If your challenge is true, they must correct your account.

When setting up an account, beware of fees. Some are within your control and some depend on a bank’s or credit union’s policy. These include a withdrawal fee, fees for using your ATM/debit card excessively, point-of-sale fees for using a debit card in a retail establishment, steep returned-check fees, fees for writing checks and over-the-limit fees for overdrawing your account. Research these before setting up your account to avoid giving your money away.

What is the difference between a debit and credit card?

Debit cards use money directly taken from your checking or share draft account. Credit cards extend credit to the holder, loaning money that you will repay within a scheduled amount of time (more on credit cards). Take extra care with debit cards, as they hold direct access to your banking accounts:

• Memorize and protect your personal identification number, or PIN
• Use your own institution’s ATM (or a credit union network, for example) to avoid fees
• Record purchases and withdrawals immediately, either in an electronic or paper register
• Sign the back of your card (it makes it harder for others to use)
• Be safe: Report any lost or stolen cards right away and, when using an ATM machine in person, be aware of your surroundings to avoid safety issues