Banking

Banking is the word we use to describe financial transactions, often occurring through financial institutions, which act as intermediaries with our money. It’s important to understand the basics of banking so you can choose a financial institution that’s best for you and your financial needs.

Types of Financial Institutions

Banks, Credit Unions, and Online Banks are just a few of the financial institutions that exist in the US financial system. Commercial and industry banks are typically what a person thinks of when referring to financial institutions. When you choose a financial institution, you should consider the differences between banks and credit unions, the services that they offer, and how those things meet your financial needs. Here are some additional resources to help you understand the different types of financial institutions that exist:

Choosing a Financial Institution – questions to ask

What are the types of accounts or "products" to choose from?

  • Checking Account – checking accounts are often used to make purchases with a check, debit or direct deposit/ routing number.
  • Savings Account – savings accounts are often used to save money and pay interest on the balance; they are most commonly associated with emergency funds (used for unexpected expenses) or savings goals (like a trip or other expensive purchases).

What services are provided by the institution and how much do they cost?

  • Online Banking
  • Bill Pay
  • Direct Deposit
  • Debit/ Check Card
  • Wire Transfers
  • Overdraft Protection

Convenience

  • Location(s)
  • Hours
  • ATM locations or networks - Note: Some Credit Unions have agreements with other Credit Unions to provide free withdrawals for out of network ATM withdrawals otherwise a service fee will be applied to that transaction

Additional questions to ask about accounts

  • Will there be a monthly fee?
  • Is a minimum balance required?
  • Are there online banking, ATM or debit card fees?
  • Is there a limit for financial transactions every month?
  • Does the account accrue interest?  If so, how much?

Deciding on which financial institution fits your needs best may take a bit of time as well as research. Check out the Decision Worksheet example provided below to help guide you as you decide which financial institution to join.

Decision Worksheet Example

Products and Services

Checking & Savings Accounts

Account

Description

Different Types

Benefits

Checking

Often used to make daily purchases.

- Free
- Interest-bearing

- Free Debit Card
- Checks
- Online Banking
- Overdraft Protection

Savings

Often used to save for large purchases or in case of emergencies.

- Regular
- Money Market
- Certificate of Deposit (CD)/ “Time”

- Interest
- Consumer Portection
- No high minimum balance

Difference between Credit Cards & Debit Cards

 

Credit Card

Debit Card

When do you pay?

Pay bill later

Money from account now

If you lose your card?

$50 max liability

Up to all your money liability

Use for online purchases?

Best

Less protection

To receive cash?

Pay high interest

Best

UIUC students can get more information on this topic by attending “Staying on Good Terms: Credit and Debt”, a workshop by the Financial Wellness Program. For more information on their workshop schedule, please visit their Facebook Page.

Money Order/ Cashier’s Check – In some cases, a money order or cashier’s check might be necessary for you to conduct financial transactions. For instance, your landlord or leasing agency may require your security deposit in the form of a cashier’s check to ensure that you have the necessary funds.  It is important that, if receiving a money order or cashier’s check, you know how to spot a counterfeit (fake) one, and where to go to obtain one when paying another person or entity.

Financial Activities: How to...

Write a Check

Why would I write a [personal] check?

  • To pay rent – most landlords accept checks through the mail or their front offices.  Since they do not often have card readers or online bill pay, it is usually easiest and safest to write a personal check. View How to Write a Check on Howcast

Learn how to write a check by clicking on a website below:

Balance a Checkbook (an old skool expense-tracking method)

Why would I balance my checkbook?

  • To account for all the money in your account – sometimes fees or charges can end up being taken out of your account without your knowledge.  It’s important to review your financial statements (or online account activity) and compare them to your own record of purchases and deposits. This used to be solely kept in a checkbook, but you can now keep records on your phone or just keep your receipts until you see they clear on your account.
  • How to Balance a Checkbook from wikiHow

Monitor Account Activity (online)

Why would I monitor my account activity?

  • To compare to your expense/deposit record (or checkbook, as described above) – you can check your account activity either through the paper statements your financial institution sends you monthly or through online banking, if that is a service that your bank or credit union provides you.
  • To ensure that your account is not being compromised in any way. Identity theft and fraud occur when someone uses your personal information in inappropriate and often financially deprecating ways. To learn more and protect yourself see our fraud and identity theft section.
  • Learn how to monitor your account online at eHow!

Making Automatic Payments

Why?

Automating payments can help prevent you from forgetting to pay the bills! But, remember, you have to keep money in your account to avoid overdrafts!

Note: Your debit card number is NOT a routing number. When setting up automatic payments or paying by e-check (e.g., for your Tuition), make sure you are using your routing number which is located at the bottom of your checks starting in the left corner

View How to Set Up Automatic Payments on Howcast

Void Checks

Why would I VOID a personal check?

If you made a mistake while writing a check or if the check is being used for direct deposit (electronic transaction)

Learn how to properly void a check

View How to Void a Check on Howcast

Endorse a Check

Why?

If you want to deposit a check, you will often need to endorse it first.

View How to Endorse a Check on Howcast

Daily Banking Activities & Terms

*Definition taken from http://dictionary.com

  • Deposit – to place for safekeeping or in trust, especially in a bank account. *
  • Withdrawal – the act of taking money out of a bank account.
  • Funds Availability – the amount of money available for use in an account.
  • NSF (Non-Sufficient Fund) – see also “bounced check”; term used when a demand for payment (check or debit card transaction) cannot be fulfilled due to a lack of funds in the account the funds are requested from.
  • Online Banking – see also “internet banking”; a system that allows customers to access their financial transaction history and make financial transactions from their financial institution’s secure website.
  • Wire Transfer – describes a method of transferring money from one person or entity to another through electronic means.