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Banking basics

Checking vs. savings, debit cards, overdrafts and how your money is protected.

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A checking account is for everyday money. You spend from it with a debit card, send money and pay bills. A savings account is for money you're setting aside. It usually pays more interest, and you use it less often.

If you spend more than you have, that's an overdraft. Your bank might decline the payment, or let it go through and charge a fee. Many banks let you turn off overdraft coverage, so purchases are declined instead of costing a fee.

Money in a U.S. bank is protected by FDIC insurance, up to $250,000 per depositor at each insured bank, for each type of account ownership. Credit unions have similar protection through the NCUA.

Words to know

Write what each word means in your own words.

1. Checking account
2. Savings account
3. Debit card
4. Overdraft
5. FDIC insurance

Questions

1. You have $45 in checking and buy $60 of groceries with your debit card. The bank lets it go through and charges a $35 overdraft fee. What's your balance now?
2. Which account fits each goal best?

   Goal	Checking or savings?
   Paying for lunch with a card
   Saving $1,000 for a car over a year
   Getting your paycheck by direct deposit and paying bills
   An emergency fund

3. How much of your money in one U.S. bank does FDIC insurance cover, for one type of account ownership?
   1. Up to $25,000
   2. Up to $100,000
   3. Up to $250,000
   4. Unlimited
4. Name two ways to avoid overdraft fees.
5. Why might someone keep their savings at a different bank than their checking account?

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