Financial companies have a history of targeting college students. Throughout the 1990’s and early 2000’s, many banks partnered with colleges and universities to offer starter credit cards to students. It wasn’t uncommon to see representatives from credit card companies stationed at tables on college campuses, and most students couldn’t walk past an information board without seeing applications for student accounts. Student credit cards gave college students the chance to jump start their credit history, yet many credit card companies approved students with no income or limited ability to repay balances.
The Credit CARD Act of 2009 changed how credit card companies review applications, which now protects young people from being bombarded with easy credit in college. Banks have since switched their focus, and many have established partnerships with colleges to offer student debit cards. Offering checking accounts and debit cards to college students may seem like an ingenious idea. This can provide students with an early lesson in personal finance and help them develop good money management skills. Plus, debit cards are by far safer than credit cards.
Credit cards in the hands of young, vulnerable college students can spell disaster. The ability to buy whatever they want, whenever they want is too much for some college students to handle. Many young adults max out their first credit card, and then apply for subsequent credit cards to maintain a level of spending.
With debit cards, college students can only spend what’s deposited into their accounts. There’s no risk of high debts or a damaged credit score. Definitely the safer alternative. But while many college students jump at the opportunity to obtain a student debit card, campus debit cards aren’t always a good deal.
Hefty fees on college debit cards has become a major cause for complaint. Colleges and universities that offer these cards can load a student’s financial aid money onto the card. And in some instances, campus debit cards also function as student identification cards. These debit cards are heavily pushed on campuses, and many students accept these debit cards without knowing the financial risks.
A recent report issued by the U.S. Public Interest Research Group Education Fund highlighted the numerous fees charged by banks. According to the report, some banks charged high overdraft fees for each day that a student account remains in overdrawn status, up to 14 days. There are also fees for depositing money onto a campus debit card, fees for swiping the debit card and fees for checking debit card balances.
Distributing financial aid via a debit card gives students easy access to funds, but excessive debit card fees often eat into their financial aid money, reducing the available funds. However, college students do not have to accept a campus debit card, nor are they required to receive financial aid via a debit card. They can request a paper check or have funds distributed directly to their college or university. Student advocates advise college students to shop around and look into banks not affiliated with their schools. This is a smart way to obtain a checking account and bank debit card, minus the excessive fees.