Got Money?
Here Are Some Ways to Turn It Into Spending Cash

By Karen Blumenthal
Staff Reporter of the Wall Street Journal

You've got a nice check in your hand, and you've got big plans for spending it. Now all you need is the hard cash.

But turning a paycheck or a gift from your grandparents into pocket money can take you through a money-management minefield. Nearly every available option comes with fees or hidden costs that can quickly lighten your wallet.

Even with the fees, bank accounts are a necessary part of life for most people, and it can be useful to get some practice now before you have to start managing money on your own. Bank of America says that 84% of young customers open their first checking accounts before they go to college.

"It's just like driving-there are responsibilities that go with it, and you can have a wreck," says Jean Ann fox, director of consumer protection for the Consumer Federation of America, a consumer-advocacy group. She says having a bank account can help you establish a financial identity and build your credit profile, which-if you act responsibly-will pay off when you need a credit card or car loan.

Here are some of the options for turning your check into spending money, and hanging on to as much of it as possible:

Check-cashing services. Check-cashing services can be the most expensive way to get your cash. Depending on your state's laws, the services can charge up to 5% of your paycheck-or $10 on a $200 payroll check-or even more to cash personal check. In most states, Wal-Mart Stores will cash payroll checks up to$1,000 for a fee of no more than $3.

The easiest way to cash a personal check is to go to the bank named on the check. Most banks will cash checks written on their accounts, though some may charge for the service.

Bank checking accounts. If you're getting a regular paycheck or you have regular expenses, like buying gasoline, a checking account may make sense. Many checking accounts now come with a debit card or check card that can be used at stores as well as ATMs, with the money coming straight from your account. (Note that a check card might carry a Visa or MasterCard logo, which makes it more widely accepted than a personal check, but it is NOT a credit card.)

Many banks offer "free" checking accounts, though the term can be misleading. A "free" account-one without a monthly service fee-may require that you keep a minimum amount in the account at all times, often as little as $300, or that you have a direct-deposit agreement, where your employer deposits your pay electronically into your account. If you can't keep the minimum balance, you'll be stuck paying the monthly service fee.

Checking accounts often include other costs as well, such as for the checkbooks themselves. In addition, most banks charge for withdrawing cash at an ATM that isn't owned by the bank or part of its network. And there's yet another fee charged by the ATM's owner.

So if the ATM tells you there will be an additional $1.50 or$2 charge to use that machine to withdraw cash, count on paying another fee of the same amount to your own bank, for a total fee of $3 to $4. In an emergency, you may think those costs are worth it to get access to your cash, but most of the time, "it's stupid to pay $4 to get $20" from the ATM, says Ed Mierzwinski, consumer program director at U.S. Public Interest Research Group, a consumer watchdog group.

Whether you use checks or a debit card, you need to be diligent about keeping a record of every dollar you spend. Don't assume the balance shown on an ATM screen is up-to-date. "That's a big fiction," Mr. Mierzwinski says. An ATM withdrawal or the lunch you just bought with your debit card may not show up on the bank's electronic records for a couple of days.

If you don't track your funds as you spend them, you risk spending more than you have in your account, a mistake that can mar your credit record and cost you much more in penalties.

How do you pick a bank? Many banks will let teenagers open an account and waive the fees if their parents already have an account there. Those under 18 will run into restrictions: Some banks will require you to open a joint account with a parent or impose other limits on your banking privileges.

To find the best deal, ask if the bank has an account aimed at college students. Bank of America, the nation's largest banking company, offers a campus account that is free for six months and then carries a service charge of $3.95 a month. If one of your parents has a Bank of America account, the student account is free for five years.

Credit unions. Unlike banks, credit unions are not-for-profit organizations owned by their members, usually employees of a certain company and their families, or all residents of a region. If you qualify, opening a checking account through a credit union may be cheaper than at a bank. But there's a catch: While many credit unions belong to ATM networks, those networks tend to be far less extensive than a bank's, meaning you could face some of those ATM fees.

Savings accounts. If you're under 16, or if you would rather build your account than spend it, a savings account may make more sense. Most banks offer free savings accounts to minors. They pay a little interest, which helps if you're saving for college or a car. But they allow limited withdrawals each month. And once you turn 18, there may be a monthly service charge if you don't keep a minimum amount in the account.