Banking Basics

Banks are safe, secure places to keep your money. You can put money into a bank account and take money out of a bank account. Your money is protected much more than if you don’t use a bank (or building society).

The are different types of bank account suitable for different needs and situations. The most common and used is a current account. Most are free. With a current account people typically pay in their weekly or monthly wages, any benefits, they pay out any bills, any debit card payments. It is a general basic account for day to day living and activities. It helps you people track and in control of your spending. If you spend more than you have in the account you risk the potential problems of becoming overdrawn. This means you have spent more money than you have and owe money to the bank. You have borrowed more than you have and if you are overdrawn there will be expensive charges and it can become hard to pay the money back and you will have to pay back more money.  You need to be careful, make sure you plan as much as possible and budget for your costs. 

Current accountstypically come with a debit card which when you use the card to purchase items, the money is taken straight away from your account that is is automatically connected and normally  free. It can be much easier to use a debit card than carry lots of cash around and typically there are no costs to do this. You can spend as much money as is in your account in a current account. You can also withdraw cash with a debit card from a cash machine (ATM.)A Debit card also uses chip and pin where you use a PIN number providing security as you need to know the PIN. You must never share your PIN with anyone, even your bank. Some will pay interest (small amount of money for you having the account). For current accounts if there is interest it will be a very very small amount if anything.

To get money out of a current account typically you can via a branch, talk to staff in the branch or use a cash machine (ATM) such as at a branch. You can also access your money via telephone or online. You will get statements from your bank. These detail the amount of money you have in your account any give details like of money going in, going out, anything you have purchased.

Credit Cardsgive you credit meaning they lend you money for a short time you pay back later when you pay your credit card bill sent to you such as once a month. They generally give you good protection when buying things (better than debit cards) but can be very expensive. If you do not pay the money you owe each month by a set date you pay interest (extra money you owe) for borrowing the money. You need to know and understand the credit card interest rate percentage and what this means. You have to make sure you are very responsible, and are good at budgeting to have a credit card.

One way to manage some of your regular bills is by setting up Standard Orders. These are regular payments you control. Alternatively Direct Debits are payments you set up with a company to pay a regular bill that they (the company) control. Both take the money on a set day each month helping you manage your bills and there for finances and spending. To stop this payment speak to your bank or the company you have the arrangement with. Also for these to be set up they do need your consent. 

Savings accountshelp you save for the future and pay interest. Some allow you to put a set amount in each month. They are not intended for you to pay money out of regularly but for planning for the future and leaving the money for some time. 

Loans are money let to you that you must pay back and also pay interest on. You can get loans from different places like banks. You must be careful of the interest rate (APR). The higher the percentage the more you pay. Some loans are meant to be very short term like Pay day loans and the interest is very very high. If you have to pay high costs you are likely to get into debt. This is were you owe more than you have. This is very risky as debts can grow very quickly much higher than you can repay. You must understand how much money you have each week/month, and be very careful.

Be careful and think do you really want to get a loan. If you have financial problems look for trusted support. If you get a loan avoid Pay Day loansas the interest is so high making the, hard to pay back. Also always avoid loan sharks. These are not regulated, trusted or allowed. They charge very high interest rates.