ECO110: Taking Charge of Your Economic Future

WEEK 5 Discussion Question

Part 1: Checking Accounts and Credit

Many consumers use checking accounts and credit, often in the form of credit cards.

What are some of the advantages and disadvantages of having a checking account?

What are some of the advantages and disadvantages of having a credit card?

What are some strategies you could use to manage credit cards to avoid paying high-interest rates and fees?

How can planning to manage your accounts lead you to be more productive and better equipped to reflect on your financial priorities?

Also, please respond to at least one classmate

Part 2: Student Response (Respond to the Student Below)

STUDENT: Heather McAward

RE: Checking Accounts and Credit

Good Morning Professor and Class,

One advantage of having a checking account is that you have a place to put your money rather than always carrying all of your money in the form of cash on you. One disadvantage of having a checking account is that you are at risk for someone getting a hold of your account information and/ or debit card information and making fraudulent purchases/ charges. One advantage of having a credit card is that you can make purchases if you need something now but don’t have enough money in your checking account. An example of this would be paying an unexpected medical bill or if your car needed an unexpected costly repair. One disadvantage of credit cards is if you don’t pay off your credit card each month (assuming you use it every month), you are charged interest and ultimately paying more for something. It is very important to manage your credit cards. What I do is I open credit cards that have lots of benefits such as a high percentage of money back for certain purchases such as groceries and gas. If I pay my credit card in full each month, I am not being charged any interest and I am earning money back on my purchases. By showing that I have had these credit cards for a lengthy period of time, I have been making timely payments, and I have carried a zero balance each month, it helps my credit score increase and it also helps me to obtain credit cards and loans with lower interest rates. I have a few spreadsheets I have created to help track how much money I am spending and where it is going. I have a monthly spreadsheet, a breakdown spreadsheet that is showing the details of the purchases (for example, one of the categories I use is “home.” In my breakdown, I show how much money is being spent each month on specific home items), and a yearly spreadsheet. For all of these spreadsheets, I update them weekly. This allows me to manage my money and to visually see where my money is being spent. By updating the spreadsheets weekly, I can analyze what I’ve spent money on so far that month and adjust my remaining money to be spent that month. It also helps me to make sure I can pay off my credit cards each month to avoid interest fees and to avoid overdrafting my checking account to avoid overdraft fees.