Student Banking: Choosing the Right Account

Most college students should have a bank account to help them pay for college expenses and improve their money management skills.

Look for accounts that offer:

  • No monthly fees
  • No minimum balance requirements
  • Free checks
  • Free debit cards
  • No transaction fees for using the bank’s own ATMs (Automatic Teller Machines)
  • Free or low-cost online services, such as bill-pay
  • Convenient ATM locations

When students choose a bank account, they often focus on two important factors — cost and convenience. Some banks have special accounts designed for student banking customers who primarily use debit or ATM cards to complete financial transactions. (A debit card can be used to make purchases in addition to withdrawals from ATMs. An ATM card can be used only to make withdrawals from ATMs.)

Although some banks will reimburse customers for fees charged by third-party ATMs, students should use the bank’s web site to confirm that there are several fee-free ATM locations on- or near-campus. Otherwise, the fees for using a debit card or ATM card can quickly add up.

Some students prefer a national bank, since that may eliminate the need to change banks after graduation. Some students use the same bank as their parents, since that may make it easier for the parents to deposit money into the student’s account remotely. Local banks, like credit unions, may offer lower fees and more flexible services.

Students also like the convenience of online services. These include accessing account information, online banking and bill-paying services, automatically transferring funds between accounts, smartphone apps and integration with Quicken or Mint.com. Many banks provide customizable automatic text message alerts when funds are low or a transaction exceeds a pre-specified limit.

Pitfalls to Watch Out For

Many colleges are now issuing third-party debit cards for disbursing student aid funds. These debit cards often come with high fees. Some allow only one fee-free withdrawal at the start of the academic year. Some restrict fee-free withdrawals to an ATM in an inconvenient location off-campus, and many times this ATM quickly runs out of money. Students always have the right to have the student aid funding direct-deposited into the student’s personal bank account and there should be no fees or disbursement delays for students who choose this option. U.S. PIRG published a report, The Campus Debit Card Trap, which discusses some of the problems with third-party debit cards.

Students always have the right to have financial aid funds deposited directly into a personal bank account, without fees or disbursement delays.

Another pitfall is overdraft protection. Overdraft protection allows a student to withdraw money even if there are not sufficient funds in the student’s bank account. But, overdraft protection can come with high fees for each transaction. Without overdraft protection, the bank will block attempts to overdraw the bank account.

Students who have trouble managing their money can use a program like Quicken or Mint.com to keep track of their spending. They can also take a financial literacy course if offered by their college or at free sites such as cashcourse.org.

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