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Questions about Bank accounts





Zuex
[Firstly, i apologize if these type of questions should have been posted in a different forum, please move if this is the case.]


I'm 15, and in september ill be 16, i want to start a bank account but im really confused..
1. How the HELL do people get into debt?
2. Do you have to pay your bank money for each month they look after your money or something?
3. Are you charged for taking money out from a cashpoint?
4. Are you charged for using your credit card?
5. I dont get the "interest" system, how comes your bank pays you money :S


I don't want to get a bank account then end up being in debt or something, i know it sounds pretty stupid.. At least when someone replys i'll know. Question

Rolling Eyes Confused
mathiaus
Firstly, these answers depend largely on which country you are in, what bank you bank with and what type of account you open.


I'm in the UK so I'll answer from here.

1. How the HELL do people get into debt?
There are many ways people get into debt. With accounts you can take out more than you actually have. When you do this, you are 'overdrawn'. The bank typically charges you for doing this so you then owe the extra money you took and the added interest. Normally the big killer to people's finances are credit cards, loans etc. People take out large sums of cash with a certain interest rate. When they get into bad debt, they either too much out than they can afford to pay back, their circumstances change such as loosing their job or having a baby, or interest rates rise to a level that they can't afford.
In the UK though, you need to be 18 to apply for credit so your safe.

2. Do you have to pay your bank money for each month they look after your money or something?
This sort of overlaps with Q5. Accounts generally speaking are FREE (Like Frihost!). You pay money into a bank, they pay you interest for banking with them. To cover this interest, some charges may be made such as paying in cheques or extra services.

3. Are you charged for taking money out from a cashpoint?
It depends which cashpoint you are at and who you bank with. Most banks will provide their customers FREE access to their machines. Some banks charge a small fee for other bank customers and some machines do not belong to any bank and charge everyone a small fee.
Generally they are free unless they say otherwise.

4. Are you charged for using your credit card?
Again, it depends who you bank with. Many credit companies will give you so many days cred free. This means that you buy a 50 item and have a certain number of days to pay them 50 back. If you don't you will have to, over a course of time, pay the 50 back with Interest. There doesn't tend to be an actual charge for using your card, rather a charge (interest) on how much you owe on the card every month.
As your only 16 (<1Cool, you shouldn't have a credit card. Rather, you will use a debit card. This takes money straight from your account and again, there should be no charges.

5. I dont get the "interest" system, how comes your bank pays you money :S
They pay you for letting them look after your money. Quite simply they want your money so pay you a little as an incentive for doing so. The banks get this extra money from the interest they charge others on loans they give out, the biggest I believe, being mortgages.


I hope this helps you. It does of course depend on a lot of factors so make sure you read the small print and don't take anything I said as set in stone. Smile
Zuex
Wows thanks alot, you've cleared alot of things out of my head, the only reason why i asked those questions were because im looking to do online work and withdraw my paypal money etc. I hate those little fee's paypal makes you pay..

Again, thanks alot for answering the questions

~ Zuex
standready
It is basically the same here in the United States as Mathiaus stated. I have had a bank (savings) account since I was 10. My advise to you would be to talk to your parents and/or visit a bank.
James_Hicks
A lot of banks have free checking accounts now. Just stop in to each bank & get a brochure with all their rates and fees. They all have them. My advice is to start out with a credit union instead of a bank. Banks can charge hefty interest rates while credit unions aren't in it for the profits. I started out with a credit union and got loan after loan with very low monthly payments on a car, etc. Now my credit score is 810. Pretty good for a guy with no money but tons of credit cards with no debt.
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