Debit Cards V Credit Cards
When you’re under 18, you’re lucky! You can’t get into trouble with credit cards as you are under the legal age! But a lot of young people are encouraged to get credit cards when they turn 18! Beware as misuse of a credit card is one of the easiest ways to get into debt.
Let’s first look at the differences between the two. A debit card gives you access to your own money, so you are limited to withdraw or spend only as much as is in your account. When you turn 18...
Account Access
It's all very nice that your money is in the bank earning interest, but how can you get it out when you need it?
These days financial institutions have an ever-growing number of access channels, or ways that you can withdraw, deposit or transfer money, check your balances and pay bills.
Branches are where banking is done in person over the counter. They were once the most common way to access money – but it made life difficult if you ran out of money when the bank was closed – like, all weekend!
These days, Branches are still around, and people mainly use them for two reasons…to deposit money or to ask the staff questions about their more complex financial issues. Face to face is still the best way to get answers to tricky questions for many people.
Cheques have also been used for centuries to pay other people without using cash. The payor simply writes who they want to pay and how much on the cheque, then signs it and hands it over. The payee (person receiving) takes the cheque to their bank, and the two banks arrange between them to have the money transferred from the payor's account to the payee's.
For a long time cheques were the best way to pay bills, because you were left with a record of what money went to whom, and when. They are easy to track. However by modern standards, cheques are pretty slow. The payee has to wait for their money to come into the account while the two banks do their thing. This is called "clearing" and can take up to 5 days.
ATM's or Automatic Teller Machines. Queensland Teachers' Credit Union installed the state's first ATM in 1979, and since then they've sprung up everywhere. All you have to do is put your card in the slot, enter your PIN (Personal Identification Number) and you can withdraw cold hard cash at any time of the day or night (provided there is some in your account)!
You can also transfer funds and check your balances using these handy machines. They have changed our financial lives!
EFTPOS or Electronic Funds Transfer at Point of Sale was introduced in the late 80's and has gradually taken over the way we shop and pay for goods. Again you use your access card and your pin to allow the shop's bank to remove money from your bank account to pay for goods.
More recently stores and dealers with EFTPOS have also introduced a cashout feature. Just male sure you have enough money in your account – it can be very embarrassing to be rejected at the checkout!
Bad Habit Alert!! A word about your PIN.
Direct Debit. Say you have a mobile phone bill to pay each month, but it's a hassle to remember to get to the store in time to pay it. You can fill out a couple of forms and have the phone company withdraw the amount monthly from your account. All you need to do is make sure the money is there, or they get a bit cheesed off.
And when you cancel a Direct Debit, you need to tell the bank and the payee (the company taking your money). Otherwise they might keep deducting it from your account.
Phone Banking. As if we don't spend enough time yakking on the phone, phone banking was introduced in the 1990's. Basically you ring in to an automatic service, key in your password using the keypad on the phone, and you can then transfer money around between accounts, check your balances, or pay bills using BPAY (see below).
Phone banking is a great way to perform simple transactions because it can be done from home around the clock…phone banking never shuts!
Obviously you can't withdraw or deposit cash this way. We still need the ATM, branch or EFTPOS for that.
Internet Banking. It had to happen – the internet burst onto the banking scene in the 1990's as everyone was becoming more familiar with the strange new concept.
Internet banking works in a similar way to phone banking, except it's more visual and you can find out more detail about your accounts. You can do the same transferring, balance checking and bill paying too. All you need is a password and internet access, and you're on track with another banking channel that never closes…and because the internet is global, you can access it from anywhere in the world.
In some financial institutions you need to register for internet and phone banking before you can use them. This is normally a simple process that can be carried out in a branch or over the phone. Call your financial institution and ask how you can get wired up to the latest banking technology.
Bad Habit Alert!! Another word, this time about your password.
Bpay. Bpay is a system that allows internet and phone banking users to pay their bills direct from their account to that of billers including phone companies, electricity and gas companies, car registration companies, insurers and literally thousands of others. You'll know when you can use Bpay to pay a company because they will have the Bpay logo somewhere on the bill they send you.
Operating Bpay is pretty straight forward, and most Internet banking sites give you detailed guidance when using it the first time.
Statements. Your bank statement is probably not the most exciting piece of mail you'll receive each month – perhaps only slightly more stimulating than the phone bill. It is however, a wealth of information about your accounts and the transactions you've performed. Where has the money gone?
The comings and goings are all there in print regardless of which channel you used at the time. It might seem like a pain, but keeping your statements somewhere together is a good idea. You'll be pleased you did at tax time.
Unfortunately all of these access channels cost heaps! That's why most banks and financial institutions charge fees. These you want to stay away from as much as possible, and we have tips for doing it next.
