Banking basics

What you need to know before you put your money in the bank

Once you’re making money, you need a bank to put it in. But not all banks are created equal. Here's what you need to know to get the most for your money.

Podcast transcript

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PETE: You’re listening to How Not to Move Back in With Your Parents here on the IU MoneySmarts Radio Network. I’m Pete the Planner, Peter the Planner, it’s just Pete the Planner. And I’m joined by Alex, my co-host, and Phil Schuman with IU MoneySmarts joins us in studio. Hello.

PHIL: Hi, I’m back.

PETE: You are back. Alex, you got the re-invite.

ALEX: That’s a big move. That’s amazing.

PHIL: I felt great. I felt special when I got that email saying that I was invited to come back.

PETE: Here’s the thing Alex. He’s our boss. Okay, so—

[LAUGH]

PETE: This week on the show, here’s what we’re tackling: banking for college students. Banking seems like an afterthought, right? Because it’s just like it helps facilitate purchases. Alex, when did you get your first bank account? Not a kid one, but like, you know, you had checks or a debit card or whatever.

ALEX: Man, my first one had to be when I got my first job. That was sophomore of high school, sophomore year.

PETE: So what was your first job, what’d you do?

ALEX: Man, I worked in a call center.

PETE: As a high school student?

ALEX: Yeah, yeah.

PETE: Didn’t you have a high-pitched voice, “how can I help you?”

ALEX: No, my voice has actually gotten higher as I’ve gotten older.

PETE: Really? Yeah. You’re like Benjamin Button.

ALEX: So I was like Barry White.

PETE: Yeah, so your voice has gotten higher since you’ve gotten older, or are you just messing with me?

ALEX: No, I completely made that up.

[LAUGH]

PETE: Okay, Phil, when did you get your first checking account?

PHIL: It would’ve been when... yeah, when I got my first job in high school.

PETE: Yeah, I remember when I got Star Wars checks when I was 16, ’cause I got my first bank account. My dad got so salty. He was so mad at me. He was like, “no one will take you seriously.” I’m like, I’m sixteen, [LAUGH] I would hope not. And so now I have boring checks that I don’t use, because it’s the 21st century. So here’s the thing, I feel like everyone’s relationship with banking is really messed up. Like every one, every adult, every kid, every college student, you struggle with banking. And I think it’s because of the tools that the banking industry has given us. So Phil, I know in your life you’re a busy guy, you want convenience in your life.

PHIL: Absolutely.

PETE: And really the difference, convenience, is you’re exchanging money for time. Convenience is kind of the go-between there. But I think when it comes to banking, the convenience that we get costs us money. We don’t realize it. Because online banking and the debit card—the two convenience tools that the banking industry gave us. But I would argue, and I think the statistics support it, that online banking and the debit card have done more to damage personal finance in the United States than any two things. Even more than credit cards, because of the tools, how we use them. Alex, how often do you check on your checking account balance these days?

ALEX: A couple times a week. It depends on if I’m making a major purchase. I’ll actually, at the beginning of the year, take a little more time to look at my checking account to see where I’m spending money on textbooks, moving costs, things like that. So it depends, but at a normal time, a couple times a week.

PETE: Now here’s a dumb question: do you feel like you and your friends at all ever talk about your banking habits? I mean, I know that’s a terribly strange question.

ALEX: We talk about our money a lot, and how much we have left.

PETE: Do you really?

ALEX: Yeah, definitely.

PETE: Do you think that’s pretty common?

ALEX: That’s what college is all about, is, do I have money to do this? Do I? [LAUGH] Can I afford it?

PETE: But you’re not talking like detailed conversation about it, just general griping about, “I’m broke.”

ALEX: Yeah, the only way it’ll come with banks is like, do you have an ATM on campus that you can get to? That’s as deep as it goes for banking.

PETE: Phil, how do you feel like ATMs impact people’s spending habits and their relationship with banking as college students?

PHIL: I think that it used to be that ATMs were more prevalent, or made it easy to get money out and just spend money wherever. Because they were so available. You could take money out, and okay, I’ve got this money to spend. But actually, just with debit cards now—debit cards, they’re just a walking ATM almost. So you just take out money whenever you want.

PETE: I would argue that the two worst things you can do, in terms of being financially aware, is to A, check your checking account balance every single day. And B, check it several times a week. I honestly think the more times you check your account, although you’ll know your balance, I think you’re less aware of your financial life. Because what you’re doing is, you’re not checking to be financially responsible; you’re seeing what you did that you didn’t account for. And I know this is true, because we’ve all done this. The three handsome yonkers sitting here in this studio. Every time we go—I said yonker, it’s a young man, it’s all right.

PHIL: That’s okay, we’re all pretty good looking, I gotta say that.

PETE: I’m not. [LAUGH] Here’s my example. So let’s say we log onto our online banking account. Okay, you enter your password, you hit Submit. There’s three or four seconds that go by before your balance comes up. What do all of us do? What do you Alex?

ALEX: I guess how much I have, and hope that I have a certain amount.

PETE: Yeah, you guess what your balance is. You go, all right, I hope there’s 400 bucks, and if there is, I’m golden. You set this arbitrary level, and if it’s this, you’re okay, and if it’s not this for some reason you’re gonna be pissed off. But it’s a completely arbitrary number. But if you really knew, you would never do that, and inevitably it’s more than you think. It’s like a $100 more and you think, man, I’m doing great. But, here’s the thing, no you’re not, you’re a dummy ’cause you missed it by a lot. And that’s part of the problem, right? So I think this balance spending, the constantly looking at your account and basing your decisions off of that is really dangerous. Not only as a college student, but as an adult in the workforce as well. And Phil, it’s because of this. We think we’re logging on to see how little we have to spend. But really what we’re doing in the back of our mind is we’re saying, this is exactly how much I have to spend. That’s actually a bad thing.

PHIL: Yeah, I would agree with that.

PETE: So Alex, for you, again, with banking. Do you ever feel like you care about bank fees, or you care about ATM fees? Are you really just more concerned about what the balance is within your account?

ALEX: I honestly don’t run into bank and ATM fees too much. A lot of banks offer the college checking, college savings accounts, which is what I have. So there’s really no fees involved, unless you overdraft, things like that, which I never do. But you should never be doing that. But it’s more of, I don’t know, it’s a place to hold our money, honestly. That’s our relationship with banks, is it’s a place where we hold our money, and that’s how we access it. So the biggest relationship we have with them are, where are the ATMs? If I do get a check, where can I go put that in on campus? And that’s honestly pretty much it.

PETE: Now I do wanna say something that will save your financial life. If you happen to have a college banking account, then you leave college, and you choose not to close it because there’s not a lot of money in there. And they happen to have fees on there, and then their account can actually go negative. They can go onto your credit report, and you can go into collections because you did not access the money at the bank that you used to bank at in college. So no matter what you do, when you leave this fine institution, by God if you’re not gonna use your checking account associated with the bank you used in college, close the account. I got bit in the backside by this phenomenon when I left school, so I don’t want it happen to you. Phil, do you have anything to add before we turn these good people loose?

PHIL: I think the big thing to always look out for is, whenever you’re banking, look at the terms. I actually ended up getting charged an account fee earlier this week because I had a big auto repair that had to happen. And so it took my account balance underneath a certain dollar amount that—I’ve had that account for probably four years now, so I didn’t really think about the account balance. But as soon as it dipped underneath, the bank is like, we’re gonna charge you for that.

PETE: You don’t look like you could fix a car yourself.

PHIL: I certainly can’t. I have no idea. I don’t know what I’m doing.

PETE: Alex?

ALEX: I could if I put my mind to it.

PETE: You can do anything.

PHIL: Let’s go outside, find a car that’s a little damaged, and see what you can do.

PETE: Let’s do it. Well in the meantime, I want to send everyone to moneysmarts.iu.edu for all the resources needed about your financial life, including making good banking decisions. Thank you for listening to How Not To Move Back In With Your Parents here on the IU MoneySmarts Radio Network.

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