10 Truths About Money You Must Know

When it comes to your finances, it’s hard to know what you don’t know. But, make sure you know these 10 things to save yourself a lot of financial headaches.

1. Your bank has its own very specific check-clearing policies which you need to know. While most banks may release funds from a check you deposit the next business day, that does not mean the check has cleared. So, if you deposit a check from someone you do not know, wait until the check has actually cleared (several business days, depending on the check and your bank) before withdrawing any money. If you don’t and the check bounces, you will be responsible for paying back the money you withdrew to the bank. This is how check scams are perpetrated every day.
2. When it comes to overdraft protection you have to opt in or opt out. If you opt in, your bank will pay your transactions when your balance is insufficient, but charge a high (up to $39 dollars each) overdraft fee for each transaction. You can also opt for overdraft transfer protection by transferring money from your savings account to cover transactions, for a much smaller fee. If you opt out of overdraft protection, your bank will decline any transactions you make when your account balance is not sufficient, but will not charge you any fees for doing so.
3. Banks can reorder your transactions. You may think transactions always appear in the order that you made them, but banks can rearrange transactions by the type of transaction (check versus electronic) or the size of transactions such as clearing the largest first, causing your account to become overdrawn even if you have just made a deposit. Make sure you understand how your bank orders transactions to avoid overdraft fees in your account.
4. Your credit score and your credit report are two separate things. Your credit score is based on the information in your credit report. Your credit score improves or declines based on what your creditors report to the credit bureaus (Equifax, Experian, TransUnion) about your monthly credit use and payment. Also, your credit report does not include your credit score but you can get both your credit report and your credit score for free, so you can monitor both easily.
5. What happens when a student loan defaults. A federal student loan defaults when 270 days passes without a payment and there is no federal student loan deferment or forbearance agreement in place that allows you to officially delay your payments. At that point, the IRS can take your refund and even your paycheck (called wage garnishment) to pay for defaulted student loans. Also, defaulted student loans stay on your credit report for seven years and cannot be dismissed in a bankruptcy.
6. Medical credit cards come with very high interest rates. It may seem like a good idea to use a medical credit card or medical line of credit to pay for expensive cosmetic procedures or braces or even necessary procedures that can’t wait. It might work to your advantage if you would have enough money to pay your balance within the month before interest is added, but if you carry the balance, medical credit cards charge an average high interest rate of 25% which can build debt very quickly on large amounts.
7. Insurance policies don’t always cover sharing cars or homes. Have plans to participate in car-sharing or home swapping? Check specifically with your insurance companies whether your policies cover your car if someone else is driving it or cover home damages or personal injury when others are renting or borrowing it. You may or may not need to increase your policy coverages.
8. Other consumer reporting agencies keep and report information about you (besides the credit bureaus.) According to the Fair Credit Reporting Act, any company that declines doing business with you based on information from a consumer reporting agency must provide you with a letter explaining any negative actions or consequence as well as a copy of the specific report used, so you’ll want to request and review that report and correct any inaccuracies. Here’s a government list of consumer reporting agencies you can check if you were not given the report.
9. You now need to password-protect your car’s “infotainment” system and know its terms for service. If you have a newer car with a digital car computer, sometimes called an, “infotainment system,” it records your driving and radio use as well as phone calls and text messages made on the system. Advertisers can sell and use this data about you if you agreed to terms of service that allow that. Also, this system may contain a lot of personal information about you, just like your phone, so be sure to password-protect it so valet, dealership and car repair professionals or others cannot access it without your permission.
10. If it sounds too good to be true, it probably is. Period. This simple mantra cannot be repeated enough when it comes to making financial decisions and avoiding scams. If a transaction requires taking a lot of money out of your pocket or bank account and a business is telling you exactly what you want to hear, simply check it out with someone else you trust before forking over the cash.