During my freshman year of college, I got my first introduction to the reality of limits. Speed limits.

On my way back to Texas A&M University  from San Antonio after Thanksgiving break, I didn't have a care in the world as I drove north on Highway 21. Belting out Chumbawumba's "Tubthumping"  (or some other equally awesome ‘90s song), I hardly noticed my speedometer as the distance between me and College Station decreased.

Until I reached the thriving metropolis of Dime Box, Texas , that is.

Suddenly, I was jolted out of my temporary euphoria by the unforgiving sound of police sirens coming from behind me. My eyes darted to the rearview mirror to confirm my horror—and then down to the speedometer to see what the damage was. I was going 82 in a 70 mph zone.

You see, according to the latest U.S. Census , Dime Box has a population of 381 people—at least one of whom is a police officer. And he was clearly on duty as I sped through his town that day. Despite my best intentions, I had gone over the speed limit, and I was introduced to the harsh and expensive consequences of doing so.

Another adult privilege that comes with a clearly-defined limit is a credit card. Just like speed limits, it is important to know your credit limit (also known as a credit line) and be sure not to go over it. Your credit limit is the maximum amount of money your credit card company is willing to lend you, and it is specified by your "Card Agreement and Disclosure." If you go over your limit, you will likely be charged a fee (again, this should be specified by your card agreement).

Let's do a little credit limit math: Say you have a $500 credit limit. This month you charge $200 on your credit card for essential purchases such as gasoline , groceries  and an oil change . If you pay off $150 of your balance on your statement due date, you have a remaining balance of $50 and you are $450 under your credit limit.

It is important to note, however, that credit cards vary in terms of when unpaid balances begin to accrue interest—so you need to monitor your account to see what your actual balance and remaining credit is at any given time.

Confused? Check out the "Young Adults" section of the Hands on Banking® program—Wells Fargo's fun, educational resource to help you learn about financial topics such as this!

Posted by Kathy at 11:24 AM |  Contact Kathy |  Permalink  |  Comments (13)
Found in Budgeting, Cars, Credit cards, Financial education, Overdraft protection, Paying, Preparing, Student loans, Wells Fargo Bank

No, this is not the story of how I ate 10 Big Macs® . This is a cautionary tale for anyone with a bank account. My stepdaughter learned a critical banking lesson—the hard way—a couple weeks ago.

She generally keeps a pretty close eye on her checking account, and she knew her balance was little bit low. However, she's been busy lately—she just finished up her sophomore year in college and was in the midst of moving into a new place. Therefore, she didn't have convenient computer access, and she didn't take the time to find an ATM to transfer money into her account.

She'd also written a $220 check for her rent deposit about a month ago, but the landlord hadn't cashed it. She knew that check was out there and could clear anytime, but still …

You can imagine what happened next. Bingo. The landlord cashed the rent check and her balance plummeted. Down to less than nothing.

Unaware, she headed to McDonald's®  for the most expensive Chicken McNuggets® she would ever eat. Allow me to illuminate:

Spend $3.95 at McDonald's + overdraft charge of $34 = $37.95

Ouch. That's an Unhappy Meal.

Needless to say, after a panicked call home, she stopped in to talk with a local banker ASAP, and she now has overdraft protection.

You definitely don't want to make a habit of overdrawing your bank account, but these things happen—I know I bounced a check or two myself in college. Anyone can make a mistake, so to avoid learning an expensive lesson, think about getting overdraft protection for yourself!

Posted by Caroline at 08:56 AM |  Contact Caroline |  Permalink  |  Comments (4)
Found in Budgeting, Checking, Financial education, Overdraft protection, Paying, Preparing, Student loans, Wells Fargo Bank