5 Financial Terms to Know Before College
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You may be ready for college, but are you prepared to handle your personal finances? An easy way to find out is to test your knowledge of a few basic financial terms.

So you’ve bought a shower caddy and extra-long twin sheets. Maybe you already met your roommate and selected some classes. But even if you feel totally ready for college, are you prepared to handle your personal finances on your own?

Don’t worry — it’s OK if you aren’t sure. Reviewing and familiarizing yourself with these five key money terms can help you ace your personal finances in college and beyond.

1. Debit

To debit means to deduct money from your account. A Check Card is sometimes called a debit card because charges on the card are deducted (debited) from the checking account. When you use your Check Card, you may be given the choice of entering your personal identification number (PIN) or signing a charge slip. In either case, the charge for that transaction will be deducted from your checking account.

2. Current Posted and Available Balance

The amount of money in your checking account — the money available at the start of the business day, which does not include any pending withdrawals or deposits — is typically called a current posted balance. The cash available for immediate withdrawal from your checking account is typically called an available balance. Your current posted and available balance may be different depending on your pending transactions. For example, if you use your debit card to buy groceries, then based on the amount the merchant requests authorization for, the bank may place a hold because it has not yet received the actual transaction from the merchant. This hold will be treated as a pending transaction and will only impact the amount you have available for immediate withdrawal (available balance), making your current posted balance higher than your available balance.

Learn more about managing your checking account in college.

3. Automatic Draft or Debit

An automatic draft or debit deducts money directly from your checking account. Many businesses and services encourage this method of payment. But be aware of the advantages and disadvantages before you authorize any automatic drafts. If your account consistently has enough money to cover all of your charges, setting up automatic drafts can be a convenient way to pay bills. However, if your account may not always have enough money to cover each automatic draft on the scheduled payment date, you may be charged fees from both your bank and biller if your account becomes overdrawn, or if the scheduled payment is returned for insufficient funds.

4. Overdraft

An overdraft occurs when your bank pays a check, Check Card charge, or other transaction on your checking account even though the transaction amount exceeds the available balance in your account. You are responsible for repaying the funds advanced by your bank to cover the overdraft — the difference between the transaction amount and your available balance — in addition to any overdraft fee the bank may charge for paying that transaction amount for you.

To avoid an overdraft, never spend more than your available balance. Another option is to sign up for overdraft protection, a service that transfers funds to your checking account, in some cases from your savings account, when an overdraft occurs. You may also be charged a fee for the transfer, but that transfer fee is typically less than the fee charged if you don’t have overdraft protection.

5. Credit

Credit allows you to make a purchase or obtain money on the promise that you repay it later, usually over an extended period. Credit cards — which can be issued by banks and businesses — are one of the most common forms of credit. With a credit card, you typically have the option to pay either your full balance or a minimum payment each month. With a loan, you typically have to pay a fixed amount each month.

For any form of credit, you might be charged late fees if payments are late. Failure to repay credit may negatively affect your credit score and your ability to finance a car or house. You should not obtain credit unless you will be able to repay that credit on the lender’s required terms.

Put your new financial knowledge to practice by creating a budget for your daily college life.

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This information is general in nature and is provided for educational purposes only. Regions makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented. Information provided should not be relied on or interpreted as accounting, financial planning, investment, legal, or tax advice. Regions encourages you to consult a professional for advice applicable to your specific situation.