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...
Interest
What's so interesting about the interest you earn on your bank account? Well, it's about the only way to get paid by doing nothing – it's your money that does all the work to earn more money. About time after all the work you've done for it!
There are two kinds of interest that you can earn on your savings.
Simple Interest
Is where interest is calculated based on the original amount you invested. Even if you don't touch your interest and it is added on to your balance, future calculations of interest will still be based on that original amount – so the amount of interest you earn will always be the same, unless you deposit more money or withdraw some.
See simple interest at work.
Compound Interest
Compound interest is way more exciting than the simple stuff, and it is a special friend to young savers. Basically, compound interest starts the same way as simple interest…you are paid a percentage of your balance. They then add that straight on to your principal.
Then, the next time your interest is calculated, it is based on the larger amount. So the interest you've already earned makes you new interest!
Over time this can mount up to a mega cash bonus, especially if you regularly add to your savings.
That's why compound interest is said to favour young whippersnappers…with time on your side you can afford to sit back and watch it do its magic. Oldies generally don't have years to put into this kind of saving scheme. By the time you reach your mid-thirties, compound interest, while still valuable, has lost a fair bit of its power.
Witness the awesome power of compound interest.
One of the weird things about interest rates is that they change ALL the time. Not by a lot normally, but it's worth checking out the interest rate on an account before you decide to open one. Many financial institutions now have special savings accounts where you can earn more interest and pay fewer fees by regularly adding to your savings and not making any withdrawals. Look on the internet, most financial institutions list all of their interest rates there!
Click here to see QTCU's latest interest rates for savings accounts.
So what else can your account do? Let's look at different ways you can get at your money.
