If you’re a student
starting college for the first time or transferring to a new college, you may
be busy meeting new roommates and going through orientation. During these first
few weeks, you may also need to get a checking or prepaid debit account.
On campus, a bank
account may be marketed to you that is co-branded with your college’s logo and
may be attached to your campus ID through a debit card. But remember, just
because an account has been sponsored by your college, it doesn’t always mean
that it’s a good deal for you.
Since we launched our Safe Student Account
Scorecard project earlier this year, we’ve been talking
with students, colleges, and financial institutions to better understand what
students need to know before they pick an account. Many colleges partner with
financial institutions to sponsor banking products. In some cases, companies pay colleges
millions of dollars in exchange for exclusive marketing
arrangements. Colleges may also negotiate with companies to offer products that
have lower fees or better terms than what students could get if they asked for
the same deal on their own.
However, a report by the Government Accountability
Office revealed that many college-sponsored accounts were no better than what
students could find themselves after shopping around, and in fact, were
sometimes worse. To spur greater transparency, we have called on
companies to publish their arrangements.
We know that it can be
time-consuming for you to understand all of the details in the student account
offered through your college. Keep these three things in mind so you can set
yourself up to make a smarter choice:
1. Just because an offer looks like official mail from
your college, you don’t have to accept it. Some colleges
take steps to promote products through official email and mailings, and sometimes
are compensated by banks for their efforts. For example, a college might use
its official email communications with incoming freshmen to promote a sponsored
account by encouraging students to use the “hot new” campus ID from its bank
partner. A college may also choose to use printed materials at orientation or
other official communications in order to highlight a banking partner, or may
offer an official session at orientation to be presented by the financial
institution.
2. Some staff on campus may work for your college’s
banking partner. It’s always okay to ask questions when you’re
deciding whether to open an account. Officials at your college can help you
understand product terms and features in order to make an informed choice, but
you should also ask questions about who you’re talking to. For example, a bank
might provide in its contract that it will lend bank employees to staff the
student ID card office. Your college may also rely on bank employees to promote
an official campus student ID that can be linked to a checking or prepaid debit
account during new student and parent orientation, allowing bank employees to
market their financial product in a role traditionally filled by college
administrators.
3. Your college may get paid when you open an account. We’ve
heard that some companies may pay colleges a fixed amount for each student that
opens and uses the college-sponsored account. You should ask questions about
how your college gets paid and keep in mind that if you feel rushed or
pressured into opening a college-sponsored account, it might be because your
college wants to sign you up to maximize its revenue under the deal.
How could this impact the fees you pay while in
college?
As we have warned
students in the past, the financial products you use can contain
high fees. In fact, other banking regulators have fined and required that
restitution be paid by providers of college-sponsored accounts for alleged
unfair and deceptive practices over fees charged to students, including an over $11 million settlement between
the Federal Deposit Insurance Corporation and the largest provider of
college-sponsored accounts.
Ultimately, the account you select can support your
saving goals and help you avoid fees. Many banks offer programs to help you
manage your spending and saving. Taking advantage of free account alerts
through email or text message can help you avoid overspending, as can simply
keeping track of your purchases and withdrawals and monitoring your account
balance regularly.
If you have a problem with your student checking
account, you can submit a complaint. If you
just want to share your experience with student checking accounts and debit
cards, tell us your story and
select “campus debit card” under the “Tag your issue” field.
Check out our checklist for opening
a bank or credit union account. If you have more
questions about student checking accounts, check out Ask CFPB, our online,
database of frequently asked financial questions and answers.
Help other students by sharing this post on Facebook
and Twitter.
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