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If you held a part-time job in high school, you may have a bank account or even a credit card in your name. But if you didn’t work — maybe you just cashed those babysitting checks — you may not be used to dealing with more than just some money in your pocket.
In college it’s a different ballgame: 23 percent of full-time undergraduate students work 20 or more hours a week, and most college students work at least a few hours a week. Rather than blowing your hard-earned cash, you may need to save some of it for tuition, books, and other college-related expenses.
The best way to do that is to make sure you choose the banking solution that’s right for you. That’s exactly what my wife and I are helping our daughter do as she prepares to attend college this fall.
Based on our research, here are the main banking options for college students, along with some of the good and bad things about them.
How to Pick the Best Bank Option for College Students
Before a close friend’s daughter went off to college for the first time, it dawned on him that she needed to set up a checking account. She hadn’t needed it through high school because she didn’t have a job. She used my friend’s bank account to cash checks, and she kept her cash in her room.
Rather than trying to make sense of the many banking options that she could have used, my friend started with a simple list of requirements that narrowed the field:
- On-campus ATMs so that she can get cash any time she needs it.
- No fees for ATM use.
- Debit card so she doesn’t need lots of cash.
- Not a credit card, so she can’t get in trouble for overspending.
- Online banking to access the account.
- Electronic fund transfer so I can send her money with little fuss.
This is a sound list to consider as you choose the right student banking option.
College Student Banking Options
The banking options are endless. Nearly all large banks offer student-specific solutions alongside their more traditional options. Here’s a quick breakdown of the main options available to students:
Capital One 360 MONEY Account
I’ll start with the option our daughter will be using this fall as she goes off to college. Described as a teen checking account, the Capital One MONEY account is ideal for college students. Both of our children have used the MONEY account since Capital One 360 bought out ING Direct, and it has been an excellent tool to teach them financial responsibility.
Pros and Cons of Capital One 360 MONEY Account
No fees or minimum balance requirements
41,000 fee-free Allpoint® ATMs, 39,000 MoneyPass ATMs, and 1,300 Capital One® ATMs
Allows parents and their children to manage the account together
Easy to transfer money to and from the account online
Cannot deposit checks at a Capital One Bank or ATM*
*The one negative listed above requires some explanation. Capital One bought out ING Direct to form Capital One 360. Capital One and Capital One 360, however, are technically two separate banks. I think the time will come when checks can be deposited at Capital One branches, but I know from personal experience that it’s not possible at the moment. The good news is that you can deposit checks with your smartphone, which is what we do. You can also set up direct deposit.
School Bank Card
Nearly 900 colleges and universities in the U.S. have debit card relationships with banks and other financial institutions, according to The N.Y. Times. Sometimes these debit cards look like regular debit cards, and they may include your school’s logo. Or your school may turn your student ID into a debit card.
While these debit cards are convenient — you can often load your student loan disbursements directly onto them — they aren’t usually the best option. In fact, many of these cards charge hidden fees, such as the $38 per overdraft fee charged by the major player Higher One.
So don’t just accept your school’s debit card arrangement. Instead, read the fine print and shop around before using one of these cards.
Pros and Cons of School Bank Card
Gives you easy access to student loan disbursements
Is easy to use around campus
On some campuses, use of your student ID/debit card may net you discounts
Lack of transparency means you may not be aware of all the associated fees
Higher fees are charged for typical college student financial behavior, like using another bank’s ATM or overdrawing an account
Traditional Checking Account (National Bank)
Many large banks, like Citi and Wells Fargo, offer checking account options made just for college students. These accounts may offer lower fees than traditional banking accounts through these same banks.
Wells Fargo has a similar option, which waives the typical $3 per month service fee to students who link the account to a Wells Fargo Campus ATM, maintain a daily balance of at least $500, or post direct deposits of at least $25.
Such affordable options as these can be great for college students, who need to make the most of every dollar. Still, large for-profit banks may charge higher fees on other things, such as overdrawing a checking account or getting money out of a different ATM, according to Forbes.
Nevertheless, this is the option we’ll choose for our daughter. She already has the MONEY account from Capital One 360, which as noted above is an ideal choice for college students.
Here are some other options to consider:
- TD Bank Convenience Checking
- USAA Classic Checking
- BOA Student Checking
- Wells Fargo Clear Access Banking℠
Pros and Cons of Traditional Checking Account at a National Bank
Student account options are often cheaper than traditional accounts
ATMs and banks are widely available with large, national banks
You can get both checks and a debit card
Online banking can make managing your money easier
Many offer excellent checking account promotions
Hidden, unexpected fees can drain your available cash
Customer service at some of the larger banks can be less personal and more hit-and-miss than at smaller credit unions
A checking account won’t help you build credit
Traditional Checking Account (Local Credit Union)
Smaller local credit unions often offer accounts similar to the large banks and may have student checking options. The difference is that credit unions often come with lower fees for everything from ATM withdrawals to overdrafts.
Also, credit unions are often known for their more personable feel. Because they’re smaller institutions, they may cut you some slack if you have financial troubles.
Plus, building a relationship with a credit union now could help you later if you need a loan. Credit union lending requirements tend to be less restrictive, so you may be able to get a loan even without stellar credit.
On the flip side, credit unions are harder to access because they don’t have as many branches or ATMs (though many reimburse or don’t charge ATM fees). However, more credit unions are offering online banking to help negate this issue.
Pros and Cons of Traditional Checking Accounts at Local Credit Union
Similar, affordable checking account options for students
Often charge lower, fewer fees
May be more flexible and understanding if you have financial problems
Often offer the same debit card and online banking privileges as larger banks
Aren’t available everywhere, so can be hard to work with if you’re traveling
May have fewer options for different types of accounts
Prepaid cards can be a way to bank without a bank. These cards, which look and spend like credit or debit cards, allow you to load cash and spend it as needed. Most allow for direct deposit of your paychecks, which can make them more convenient.
Prepaid cards can be quite convenient for college students. In fact, some colleges’ student IDs double as prepaid cards (rather than debit cards). These cards can also be a good way to force yourself to stick to a budget because you can’t spend more than is available on the card.
Prepaid cards, unlike credit cards, don’t charge interest (because you’re not going into debt) and don’t require a credit check.
On the other hand, prepaid cards can come with some pretty high fees. Some have high opening fees, monthly maintenance fees, and fees for loading the card. So you must do your research to find the best prepaid card options before you decide which card to use.
Also, if your parents are giving you some spending money for school, prepaid cards can be helpful. Some offer the option for parents to load money onto the card for the student to spend.
Pros and Cons of Prepaid Card
Easy to get, no credit check required
Won’t let you overspend
No debt or interest building up
Spend like credit or debit cards online and in person
Can be easy to reload and check balances
Don’t help build your credit history
May come with high fees
While you don’t want to run up a bunch of credit card debt, when used wisely credit cards can be a decent option for college students. New credit card rules mean that some cards come with longer zero-percent APR promotional periods and better rewards.
If you don’t have much of a credit history, you may need to apply for a specialized student credit card. Since cards like this are designed for students, they don’t require a high credit score to get.
Credit cards can help you build your credit history, as long as you use them well. Some give you free access to your monthly credit score so that you can track your score.
Pros and Cons of Credit Card
Help you build credit
May have long zero percent APR periods to take advantage of
May come with cash back or other rewards
Often offer online account management
Can be tempting to go into debt
May have high interest rates after the introductory period
May be more difficult to get without a credit history
Using Parents’ Account
If you can’t get an account on your own — or if you mostly rely on your parents to fund your school-related costs, anyway — you may become an add-on to your parents’ accounts. In fact, if you’re applying for any sort of credit, you may need to have your parents apply as co-signors so that you can leverage their credit history.
It’s usually easy to get a credit card issued to you from your parent’s account, but you will need to be careful of your spending. After all, your parents will ultimately be responsible for your spending, and you don’t want to take advantage of them.
You may also be able to use your parents’ checking account, or a secondary checking account set up with your name on it, for your banking needs. This can be helpful if your parents want to transfer a set amount of money to you each month, especially if they can link the secondary account to a savings or primary checking account.
You don’t need to have great credit
Your parents can hold you accountable for your spending decisions
You can easily get money from your parents when they need to give it to you
This doesn’t help you build your own credit or banking history
Parents will also have access to your money if you deposit into a joint account
Which Is Best for You?
Now that we’ve laid out the basic banking options for college students, it’s up to you to decide which is best for you. If you’re like many students, your best bet is probably a combination.
For instance, if you want to develop good spending habits but also need to save money, consider a checking account and a prepaid card. Deposit your checks into the checking account, and then transfer a small, set amount of cash to your prepaid card to spend.
As long as you don’t otherwise touch your checking account, you won’t overspend, and you’ll have some money stashed away for larger school expenses.
One thing to note: if you have any money at all to save, open a savings account. Set aside money to pay down student loans, buy your first home, or just for an emergency. You’ll be glad you did.
About Those Pesky Student Loans You Probably Have
It can be tough to think about opening a bank account when you have student loans to pay. Though there may not be much you can do about them while you’re still in school, it’ll be good to know you’ll have options once you get out. As scary as the loans might look right now, you may be able to do either a refinance or consolidation to lower the monthly payment after graduation.
One of the best places to do this is through Credible. It’s an online student loan marketplace that will allow you to get loan quotes from several student loan lenders with a single online application. Getting prequalified by several lenders at once will be the best strategy for getting the lowest cost to refinance.
Related: Best Student Loan Without a Cosigner