College Debit Cards: Should You Sign Up For One?
Many colleges provide debit cards to students—as a way to access their financial aid. The schools promote it as an easy and convenient way to provide aid to students, save paper, and save money on printing and issuing checks. They also claim the debit cards are helpful to lower-income students who do not already have bank accounts, and who may otherwise use an expensive check-cashing service to cash their student aid checks.
They also tout convenience to students. And many schools have made it easier by allowing students to use their student ID cards as debit cards. Students can now open a bank account through their online college—even if they aren’t receiving financial aid.
But there are pitfalls for the students as well. These include:
High fees. Swipe fees
Overdraft fees. Inactivity fees. Fees for checking your balance. Fees for putting more money into your account. These can be as much as $.50 every time you swipe your card as a debit and not a credit card, $38 or more for overdrafts, and a $10 charge if you’ve let your account go six months or more without activity. The fees vary depending on the company that runs the debit card program—but they are often high. College debit card fees can potentially be much higher than fees at traditional banks and credit unions.
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A lack of information about the fees
Many students don’t realize what fees are associated with their debit cards until they see their money draining from their accounts. And it’s not unusual for schools to encourage this ignorance, by not instructing financial aid officers to clearly spell out the terms. And for many college students just out of high school and unused to dealing with their own finances, ignorance can be dangerous.
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A lack of incentive to shop around
It’s not unusual for parents and students to believe that services and offers coming from a traditional or accredited online college are given with their best interests in mind. Sometimes this is the case, but sometimes it’s not—and both students and parents need to shop around. No school is allowed to force students to bank through them—and it can be useful to choose a bank account before arriving on campus.
Credit card marketing to students
Federal law now prohibits credit card companies from aggressively marketing to students on campus or through accredited online colleges—by giving out free t-shirts if you sign up for a card, for instance. But through the debit card program, many banks promote credit card programs that may be inappropriate or financially risky for students. In addition, many banks see the opportunity to provide debit card services to students as more of a long-term loyalty endeavor than a short-term profitability one; and may forego high fees in the hopes of keeping students as customers when they graduate and need mortgages, car loans, and other services.
The bottom line is that student debit card programs are usually instigated for the school’s benefit—not the students’. Colleges save a significant amount—sometimes as much as $13 per check, factoring in labor and facility costs—to issue student aid checks to students. But often, it’s students and parents who pay the price.
Before signing up for your school’s debit card program, do your research to make sure you’re getting the best deal. Remember that schools are not allowed to force you to use their debit programs. And if possible, sign up for direct deposit instead—so you can still get your student aid fairly quickly without having to wait for a check, and without having to deal with the endless fees you might be faced with when using a student debit card.
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