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The college student's 8 steps to picking a bank

Allie Johnson

October 1, 2014

Starting college? If so, choosing your bank wisely could save you money, so you have more to spend on tuition, books and coffee to fuel study sessions.

“It's important for students to know they have options,” says Suzanne Martindale, a staff attorney with Consumers Union, which in August 2014 released a report about students and banking products.

College students may not realize it, but they don't need to use banking products offered by their schools. Actually, with a little knowledge and planning, students might find better financial services than the ones associated with their universities, experts say. Here are eight steps to take:

  1. Keep your current account. Most college students already have a bank account, probably at home, Martindale says. If you do, your best option might be to have student aid money deposited directly into that account, at least for the first semester, she says. Holding off on opening a new account gives you time to settle in and shop around, she says.
  2. Scrutinize products offered by your school. Many schools partner with financial institutions to offer student checking and savings accounts, debit cards that can double as student IDs, and other products, according to the Consumers Union report. Consumers Union looked at campus financial products from nine institutions and found that some products offered low fees and convenience, while others were costly and complicated. Fees charged by some school-affiliated banking products included: monthly fees as high as $7; up to $3.50 for a cash withdrawal from an out-of-network ATM; up to $2.50 for checking an account balance at an out-of-network ATM; and point-of-sale PIN fees as high as 50 cents each, according to the report. “In some cases, the school-sponsored account might not be best,” Martindale says.
  3. Look at how you bank. The Consumers Union report found that usage patterns can have a big effect on how much students pay in bank fees. For example, with one campus checking account, Higher One's OneAccount, an infrequent user might pay only $10.50 a year in fees, a moderate user might pay $95 and a heavy user might pay $520. “It's good to really think through how you plan to use an account,” Martindale says. For example, if you always use your debit card instead of cash, ATM fees might not matter much to you, Martindale says. But she adds that you should make sure your bank doesn't charge a fee when you swipe your card and enter the PIN at a store checkout.
  4. Shop around. “Take a look at what's in your area — and not just on or near campus,” Martindale recommends. By looking at several banks and credit unions, you'll have a better chance of finding one that's a good fit , she says. Check the fine print on all accounts you're considering — for example, whether there's a monthly fee for checking and whether you need to keep a minimum balance in the account, says Tahira Hira, professor emeritus at Iowa State University and a personal finance teacher and expert. Take an especially close look at the overdraft fee: Some can be very high, Hira says. In fact, the median U.S. overdraft fee is about $35, according to a study by Pew Charitable Trusts. And the Consumers Union report found overdraft fees as high as $38 on some campus accounts.
  5. Check for deals. Some banks or credit unions that have no affiliation with a particular university will offer special deals — such as free checking — to students who can present a valid student ID, Martindale says.
  6. Scout out ATM locations. If you plan to get cash regularly, check to see if in-network ATMs are easily accessible for you. Or, find out if the bank or credit union you're considering offers a certain number of reimbursements for out-of-network ATM fees each month, Martindale recommends.
  7. Think carefully about overdraft protection. Once you get an account, you have a choice: Opt in to overdraft protection and get hit with a hefty fee if you let your account go in the red. or do nothing and get your debit card purchase declined if you lack enough funds. For consumers who opt in, overdraft fees make up 75 percent of total bank fees paid, an average of $250 a year, according to a July 2014 report from the Consumer Financial Protection Bureau. And college students might be more likely to get hit with these fees: The CFPB report shows your chances of overdrafting go down as you age, and 10.7 percent of consumers ages 18 to 25 have more than 10 overdrafts per year.
  8. Manage your money well. College students probably shouldn't have credit cards, so it's good that it's hard for consumers under 21 to get one, Hira says. College students should use their debit cards for money management practice, she says. “A debit card is like training wheels,” she says. “You can only spend the money you have.” She recommends keeping meticulous records of all your transactions — down to that cup of coffee you buy every day at the campus coffee shop. Check your account balance frequently, not only to ensure you don't go over budget, but also to protect your account from getting drained by hackers. Get in the habit of paying any bills in full and on time — this is good practice for when you get a credit card. Finally, take a personal finance class, she says.

“Always know where you stand financially,” she says.