Banking on campus can be treacherous new territory for students to navigate. Banks take advantage of the fact that every fall, thousands of students leave the security of their parents’ homes and make their own financial decisions for the first time.
It’s important to be proactive in preparing yourself for your newfound financial responsibilities. Hopefully, you’re here because you’ve decided to get an early start on making knowledgeable on-campus banking decisions. Check out the tips below and start taking steps toward becoming a financially smart college student!
1. Know what makes each financial institution different.
Most students only look at major banking establishments when considering where to keep their money safe. The advantage to bigger banks is that their branches and ATMs tend to be more conveniently located. The drawback to big banks is that their accounts generally come with low interest rates and multifarious hidden fees that can eat up your money quicker than you can scarf down a Chipotle burrito.
No need to fret. You have other options! The important thing is to know the differences between each type of financial institution, so you can make an early, informed decision about what works best for your lifestyle. Things you’ll want to research and compare include fees, interest rates, online or mobile monitoring options, branch proximity and ATM locations.
2. Know how to bank without a branch.
Nowadays, you don’t have to be dependent on brick-and-mortar branches to handle your finances. Online and mobile banking services give you the freedom to go with the bank or credit union that offers you the most bang for your buck. Most big banks and credit unions offer services (like online bill pay or text banking) that help you make transactions and keep close tabs on your money from your computer or phone. Before committing to a credit union or bank, consider the different online options they offer.
If you’re willing to forego branches altogether, you could end up saving quite a bit of money. Many Internet banks allow you to manage your finances online, sans fees. This is because the money they save on running branches is reflected in bigger savings for their customers. Make sure to do your homework, not only to find out which online banks can save you money, but also to find out which online banks are legit.
3. Know what fees you can anticipate.
Did you know many banks charge you for using their ATMs if you’re not their customer? While this might be common sense for some, it might come as a surprise when your bank also charges you for using another bank’s ATM. Those two charges combined can add up to the price of a well-budgeted lunch.
Your checking account might also be costing you minimum balance fees or fees for not making regular deposits. To avoid incurring such fees, compare college checking accounts before choosing one and keep a close eye on your balances. Also, keep in mind that similar fees may apply to savings accounts, with the added limitation that you may only withdraw or transfer part of your savings 6 times per month.
If you like the convenience of paying your bills online, make sure you’re not being charged for that too! Also, make sure that automatic payments (for bills or otherwise) don’t exceed your ability to pay for them. If you spend your funds (automatically or otherwise), but don’t have the cash to cover your purchase, you’ll be charged non-sufficient funds or overdraft fees.
4. Know what you need.
Remember that talk your parents had with you about “wants” versus “needs”? Well, that convo definitely comes into play here! You should only borrow what you absolutely need. If you must borrow, make your financial aid office and loan servicers your new best friends. Check in early and often about disbursement and repayment dates, and terms and conditions.
Three basic ways to borrow money for school are federal student loans, private loans and credit cards, all of which require you to repay with interest. Depending on the amount of money you borrow, your interest rates, and how quickly you pay off the loan or credit card, your interest can accumulate quickly and seriously contribute to your total debt.
If given the option, you should always take a federal loan over a private loan or credit card because they offer better interests rates and more flexible repayment plans. Avoid getting a credit card if you’ve had trouble budgeting in the past. It can be a great way to establish good credit, but recovering from bad credit is not easy, and neither is repayment due to high interest rates.
5. Know how to keep your money for yourself.
Be cautious about getting your financial aid through your school ID. Many schools have recently come under criticism for using third-party financial institutions to disburse financial aid through the debit function on their school IDs. Third-party institutions charge fees (not unlike some banks) that cut into the student financial aid packages loaded onto the cards.
Of course, we encourage you to learn about the debit options your particular school offers and compare your school’s accounts to those of different credit unions or banks. If you choose to get a checking account that is separate from your school ID, we highly suggest getting direct deposit set up to receive your financial aid (including work-study). Some schools charge to send you paper checks, but direct deposit is generally a free or cheaper alternative and ensures your money will get to you faster than snail mail.