LibGuides: Financial Foundations : Banking, Credit, and Debt

What is Banking?

Banking is the process of managing money through financial institutions like banks and credit unions. These institutions provide essential services such as storing money, processing transactions, and offering financial products like loans and credit cards. Banking plays a crucial role in financial stability by helping individuals and businesses manage their finances securely and efficiently.

Basics of Banking

Checking Accounts: Used for daily transactions like deposits, withdrawals, and bill payments.
Savings Accounts: Help individuals set aside money while earning interest.
Online and Mobile Banking: Provides convenient access to account management, transfers, and payments.
Bank Fees: Charges for account maintenance, overdrafts, and ATM usage—understanding these helps avoid unnecessary costs.
FDIC/NCUA Insurance: Protects deposits up to $250,000 per account holder in case of bank failure.

Understanding banking basics is essential for managing money wisely, building financial security, and achieving long-term financial goals.

What is Credit?

Credit is the ability to borrow money or access goods and services with the agreement to pay later. It is an essential part of financial management, allowing individuals to make large purchases, build financial history, and access better financial opportunities. Responsible credit use helps build a good credit score, which impacts loan approvals, interest rates, and even job applications.

Basics of Credit

Credit Score: A numerical representation of your creditworthiness, typically ranging from 300 to 850.
Credit Report: A record of your borrowing and repayment history, maintained by credit bureaus.
Types of Credit: Includes credit cards, personal loans, auto loans, and student loans.
Interest Rates: The cost of borrowing money, influenced by your credit score.
Responsible Use: Paying bills on time, keeping balances low, and avoiding unnecessary debt help maintain good credit.

Understanding credit is key to financial stability, as it affects your ability to secure loans, rent housing, and make significant financial decisions.

What is Debt?

Debt is money borrowed from a lender with the agreement to repay it over time, usually with interest. It can be a useful financial tool when managed wisely, helping individuals make large purchases such as homes, cars, or education. However, excessive or mismanaged debt can lead to financial difficulties and stress.

Basics of Debt

Types of Debt: Includes student loans, credit card debt, auto loans, and mortgages.
Interest Rates: The cost of borrowing money, which varies based on creditworthiness and loan type.
Minimum Payments: The smallest amount required each month on credit accounts, but paying only the minimum can lead to high-interest costs.
Debt Repayment Strategies: Methods like the snowball (paying off smallest debts first) or avalanche (paying off highest interest debts first) help manage and reduce debt efficiently.
Credit Impact: How debt is managed affects credit scores, influencing future borrowing opportunities.

Understanding debt and repayment strategies is essential for maintaining financial health and avoiding long-term financial challenges.

Free Online Resources

Hands on Banking
Hands on Banking is a free financial education program designed to help individuals of all ages learn essential money management skills. It offers interactive lessons on banking, budgeting, saving, credit, and financial planning. The platform provides tailored resources for students, young adults, and educators, making financial literacy accessible and engaging. Whether you're opening your first bank account or learning how to build credit, this resource provides practical tools to help you make informed financial decisions.
Consumer Financial Protection Bureau – Credit Cards
This webpage from the Consumer Financial Protection Bureau (CFPB) provides essential information on credit cards, including how they work, how to compare options, and how to avoid common pitfalls like high interest rates and fees. It offers guidance on managing credit responsibly, understanding credit card agreements, and protecting yourself from fraud. Whether you’re new to credit cards or looking to improve your financial habits, this resource can help you make informed decisions.
MyCreditUnion.gov – Understanding Credit
This webpage from MyCreditUnion.gov provides essential information on credit, including how it works, why it’s important, and how to build and maintain a strong credit history. It explains credit scores, reports, and the impact of responsible borrowing. The page also offers tips on managing credit wisely, avoiding debt traps, and protecting yourself from identity theft. It’s a valuable resource for anyone looking to improve their financial literacy and make informed credit decisions.
Dealing with Debt - MyCreditUnion.gov
This webpage from MyCreditUnion.gov provides practical advice and resources for managing and reducing debt effectively. It covers strategies for tackling credit card debt, understanding loan repayment options, and recognizing the warning signs of excessive debt. The page also includes tips for budgeting, prioritizing payments, and avoiding common debt-related pitfalls. It is a helpful resource for anyone looking to take control of their financial situation.
Khan Academy: Interest and Debt
This Khan Academy unit covers interest and debt, explaining concepts like simple and compound interest, loans, credit, and the time value of money through free videos and exercises.
Khan Academy – Accounting and Financial Statements
This Khan Academy resource provides an introduction to accounting fundamentals and financial statements. It covers topics such as balance sheets, income statements, cash flow statements, and how they are used to assess a company’s financial health. The lessons are beginner-friendly, offering clear explanations and practical examples to help learners understand how to read and interpret financial data.
Khan Academy – Money and Banking
This Khan Academy resource explains how the banking system works, covering topics like how money is created, the role of central banks, and the functions of financial institutions. It also explores how banks lend money, how interest rates affect the economy, and the basics of monetary policy. The lessons are designed to help learners understand the importance of banking in personal finance and the broader economy.

Books about Debt

Managing Debt by Alexis Burling
ISBN: 9781532172397
Publication Date: 2019-08-01
Managing Debt takes a look at the differences between good and bad debt, discusses how to build a good credit score, and explains how to pay down debt. Features include worksheets, key takeaways, a glossary, further readings, websites, source notes, and an index.
Clever Girl Finance by Bola Sokunbi
ISBN: 9781119580836
Publication Date: 2019-06-25
Clever Girl Finance encourages women to talk about money and financial wellness and shows them how to navigate their own murky financial waters and come out afloat on the other side. Monitor your expenses, build a budget, and stick with it. Make the most of a modest salary and still have money to spare Keep your credit in check and clean up credit card chaos Start and succeed at your side hustle Build a nest egg and invest in your future
Financial Rules for New College Grads by Michael C. Taylor
ISBN: 9781440861055
Publication Date: 2018-04-12
An indispensable guide for any recent graduate that provides simple, easy-to-follow rules for making smart personal finance choices during the first decade of one's career. Having graduated from college with a degree, even the luckiest newly minted professionals--those who are able to quickly find a full-time job and support themselves--are often burdened with thousands of dollars in student loan debt. Many of these young professionals grow up hearing that they should not invest until their debt is paid off. Others fall too readily for investment scams or the siren call of instant entrepreneurship. Still others don't invest at all. From financial expert Michael C. Taylor comes a proposed means by which to not only pull oneself out of debt but to start building wealth from the first day on the job: adoption of modesty, skepticism, and optimism.
Debt Information for Teens by Keith Jones
ISBN: 9780780815698
Publication Date: 2017-07-21
This print and online resource provides consumer finance information about money, interest rates, loans, credit cards, finance charges, predatory lending practices, preventing and resolving debt-related problems, and more.
CliffsNotes Graduation Debt by Reyna Gobel
ISBN: 9780544319097
Publication Date: 2014-04-22
With updated information that reflects the myriad changes in the student loan industry that affect students and their parents burdened with student loan debt,CliffsNotes Graduation Debt, Second Edition provides a step-by-step road map for effectively managing student loan debt and having a successful financial life. Divided into small subsections geared toward those neck-deep in debt, this book is easily digestible to students who aren't inclined to focus on their finances. Readers are encouraged to take action steps, such as finding long-lost student loans that may have gone into default, discovering payment plans they can afford, consolidating loans when it makes sense to do so, saving money on eating out and groceries, improving credit scores, tweaking their debt-to-income ratios so they can buy a home, and discussing their student loan and non-student loan debt with their significant others. By the end of the book, readers will be on the road to financial stability, with extra money for vacations and other fun stuff, too.