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Cash, Check or Credit?

Until now you may have used only cash to make purchases. Cash is great! But as you get older, sellers will give you other ways to spend money. Stores want to make buying easy for you after all!


When you pay cash for purchases, you know you already have the money to buy the items. That's unless you are using money that should be reserved for something else. Some businesses will give you a discount on the price of an item if you pay cash instead of using a credit card. Why? Because stores have to pay a fee to the credit card company for every transaction. But cash purchases can be harder to track. You can look in your wallet and have no idea where that $20 bill went! Keep receipts somewhere safe (in your Money Diary) so you can track where your money goes.

Checking accounts

As you get older, have more regular expenses, and get your first job, a checking account becomes a convenient place to put some money. However, checking accounts do not pay interest on the balance in them. So keep just enough of a balance in your checking account for your expenses. But move your extra cash to a savings account where it can earn interest. If you use a checking account the right way, you have a good record of how you spend your money. This makes managing your money easier. Here are some features of Checking Accounts:

ATM Card

If you have a checking account, it probably came with an ATM (Automatic Teller Machine) card. An ATM card gives you "access" to your bank savings and checking accounts – 24 hours a day, 7 days a week. "Access" means you can withdraw money or deposit it using this card without going into the bank.

While the card is convenient, be careful that it's not too convenient. Withdrawing money to spend on impulse is a great way to drain your account. There's a reason you can find several ATM machines in every shopping mall. If you don't have enough money in your wallet, the mall is making it easy for you to withdraw money from your bank accounts.

Each ATM machine is owned by a specific bank. You can use any machine to access your account, but you will be charged a fee to use an ATM that does not belong to your bank. These fees can add up fast.

Debit Card

Many ATM cards also work as debit cards. You can use debit cards to make purchases. While a debit card may look like a credit card, it works differently.

  • A credit card puts off paying for your purchase until sometime in the future.
  • A debit card immediately removes the amount of the purchase from your checking account and pays the store.
  • Debit Cards and Credit Cards do not offer the same protection if you lose the card or it is stolen.
  • Using a debit card at a bank ATM not owed by your bank? You'll be charged an extra fee.

Don't use your debit card unless you're sure you have the money in your account. With electronic processing, if your account doesn't have enough money to pay for the purchase, the store's processing machine may show a message that you don't have the funds. That's embarassing. Worse, the bank may let you overdraw the account and charge you a hefty fee to do it.

Whenever you use a debit card, record the purchase in your check register and deduct the amount RIGHT AWAY. If you forget to enter the amount, a few days later, you could spend that money all over again! Or you could write a check for more than you actually have in your checking account. You'll get another penalty! Learn more about Tracking Your Checking Account.


A few years ago, you could get away with writing a check for more than you had in your account. You could write the check and then quickly put enough money into the account to cover the check. And if you got the money deposited that same day or the next day, chances were good that you would beat the check to the bank. Not anymore. Electronic processing happens instantly.

While checks may seem “old fashioned,” there are still many times when a check will be the best way to pay. They give you a record that you paid for something. Think of a check as a promise to pay, just like your signature on a debit card receipt. Learn how to write a check and track all transactions in your checking account (Writing a Check).

Direct Deposit

More employers are using direct deposit, sending your pay directly to your bank account. Most people ask that their paycheck is deposited to their checking account. You then get an Earnings Statement that looks similar to a paycheck. Learn more at Decoding Your Paycheck.

Online Banking

More and more banks are letting you bank online and pay regular bills online. Bills like your cell phone, utilities, cable TV and credit cards are easy to pay this way. These transactions will come directly out of your checking or savings account. Paying bills online can be very convenient. But remember you need to keep track of all your transactions in your check register so you know how much money you have. Don’t rely on the bank. Mistakes can happen. Worse, if your debit card is lost or stolen or your identity is stolen, you need to be able to list transactions you made and identify those that you did not make.


When you use a credit card, you're really taking out a loan. Credit-card companies and banks that issue credit cards are letting you borrow their money when you use their cards. If you don't pay what you owe in full and on time that month, you'll have to pay interest on the balance you owe. You will be in debt. Get to know more about credit cards – their advantages and disadvantages – before you use them.

If you want to buy a product online, a credit card is usually the best method. You need to make sure you are dealing with a reliable company and that you are using a secured site. Always look for a site that displays a secured site logo. This symbol tells you that the site does not keep your transaction information – like your credit card number – unless you set up an account with it. More importantly, the logo means the site uses a safe and secure system to process the transaction. Plan to pay the credit card bill RIGHT AWAY or you will be carrying a debt!