University Checking Accounts Don't Make the Grade
They're marketed as a good deal, but their high overdraft fees should prompt college students to look off campus or online instead.
By Tony Armstrong
Like many a college freshman, Tyler Riley arrived on the West Virginia University campus and immediately faced a series of decisions: which classes to take, which clubs to join, whom to befriend. Compared with these, the choice to open a checking account at his school’s on-campus bank felt like a no-brainer.
“I first decided to bank with them because they didn’t have a monthly maintenance fee for students, they had mobile deposit and were located close by,” Riley says.
But then he learned one of his first college lessons: The account, though convenient, offered no breaks when it came to overdraft fees, and Riley incurred them repeatedly. These are the penalties a bank charges when it covers a transaction a customer makes without having enough money in his or her account, and many banks will charge it three or four times per day as successive transactions come in. It’s an arrangement where the costs can quickly add up.
- The median overdraft fee of the 20 university-affiliated accounts we surveyed is $34.50, just below $35, which is the national median, according to the Pew Research Center.
- The average college student has an overdraft twice per year, according to CFPB data. If every full-time undergraduate student were using the average university-affiliated checking account, the combined cost of those overdrafts would be $828 million.
- Better alternatives are out there: NerdWallet recommends Simple, Capital One 360 or the BBVA Compass ClearSpend prepaid debit card — none of which charges an overdraft fee.
Riley soon sought other options and eventually switched banks. His story reflects a larger issue: Americans ages 18 to 25 incur more overdrafts than any other age group, according to a NerdWallet analysis of data provided by the Consumer Financial Protection Bureau.
But while students might assume that university-affiliated accounts are good for them — indeed, the schools and banks and credit unions say these accounts are geared specifically for students’ needs — the overdraft fees typically are no better than the national median of $35.
“Of consumers who face overdraft charges, a disproportionate number are students, but it doesn’t have to be that way,” says Devan Goldstein, a banking expert at NerdWallet. “There are cheaper ways to learn how to avoid overdrawing your account than having that brutal first experience with those fees.”
It’s up to students to monitor their accounts and not spend more than they have, of course. But using a bank that doesn’t penalize them if they do slip up can limit the costs of such mistakes.
NerdWallet examined university-affiliated checking accounts at 20 of the largest schools in the country. We found that these partnerships often give the bank preferred access to new customers and the school a new source of revenue — but students would often do better opening an account elsewhere. We’ll tell you where below.
There are cheaper ways to learn how to avoid overdrawing your account.Devan Goldstein,, NerdWallet banking expert
Why universities and banks partner
Becoming a university’s official partner can give a bank competitive advantages, including the right to have the only branch on campus, place ATMs and signage in high-traffic areas, or hold giveaways and other promotions. All of this allows a bank access to an important group: people making their own financial decisions for the first time.
Meanwhile, universities don’t team up with banks or credit unions that they think will provide students with bad products. After all, the accounts we studied are no worse than the national standard, and it’s not unusual for schools to strike exclusive deals with other companies — coffee chains or T-shirt makers, for example. And sometimes schools genuinely need the services an on-campus bank can provide.
Still, says Seth Frotman, assistant director for the Office for Students and Young Consumers at the CFPB, “history tells us that when schools and banks get together to jointly market products like campus checking accounts, credit cards or student loans, students can pay a steep price.”
Seven years ago, West Virginia University found it could no longer handle disbursing financial aid refunds to its students. The university issues about 24,000 per year, ranging from a few dollars to several thousand. That’s why it started searching for a banking partner, says Dan Durbin, senior associate vice president of finance at WVU. Students said they wanted an on-campus branch, so he included that in the partnership proposal. The school received applications from a handful of interested banks.
WVU eventually chose PNC Bank. The bank pays the school $400,000 annually for the right to use WVU’s logo on a co-branded debit card and for rent on two on-campus branches, Durbin says. He estimates that about 11,500 students have opened a PNC account since the deal was struck. The checking account that bears the WVU seal, the one Tyler Riley opened as a freshman, charges a $36 overdraft fee, a tick above the national median for all accounts.
“When we engage a school like West Virginia University, we enter a collaborative relationship to focus on the best financial interests of the Mountaineer students,” says Nick Certo, PNC’s senior vice president for university banking. Certo also acknowledges that “PNC has a chance to build long-lasting customer relationships with young people who are likely to continue to live and work inside our retail network after graduation.”
It’s a reminder that a school’s business deal with a bank or credit union is just that: business. And these days the partnerships provide universities a steady — and sometimes much-needed — source of revenue.
History tells us that when schools and banks get together to jointly market products like campus checking accounts ... students can pay a steep price.
In 2015, the University of California, Berkeley found some reprieve from its financial challenges when it signed Bank of the West as its official banking partner. The deal will net the school $17 million over 10 years. That money will benefit students through academic scholarships, internship funding and on-campus personal finance education, according to the partnership announcement.
“These resources are designed to help the students transition into financially responsible adults while at college, as well as give them the tools to succeed after graduation,” says Solly Fulp, executive director of UC Berkeley’s University Partnership Program.
Fulp adds that the school selected Bank of the West “following a collaborative process” that involved “gaining input from an engaged working group that included faculty and student representatives.”
University of Minnesota spokesman Steven Henneberry says that his school established a relationship with TCF Bank to “provide greater convenience” to students and “secure a long-term funding source that [the school] would reinvest in students through scholarships and programming.” TCF Bank pays Minnesota around $1 million each year. The exact amount is based on the number of active TCF Bank checking accounts held by students, faculty and staff.
The overdraft fee on TCF’s student checking account is $37. Bank of the West charges $26 for the first one and $35 for subsequent overdrafts.
Dylan Bland, a former Berkeley student, has avoided Bank of the West’s overdraft fees by regularly monitoring his balance. As a result, he says, “banking with them has been totally fine.”
But Bland is more conscientious than most when it comes to his account balance. The average college student incurs 2.2 overdraft fees per year, according to CFPB data. It’s important for those students especially to select an account with low overdraft fees or, ideally, no fees at all.
Scrutinize accounts and their fees
Universities often give students a few weeks to attend classes before asking them to set their schedules. But unlike Intro to Shakespeare or Principles of Economics, you can’t take a checking account for a test drive.
Instead, take plenty of time to understand a checking account’s fee schedule and services before signing up. For example, if you incur the average of two overdraft fees per year and pay $35 per overdraft, you’ll be out $70 — money that could be better spent on textbooks, rent or some weekend R&R.
Before you sign up for an on-campus checking account, ask:
- What’s the overdraft fee?
- Is there a limit to the number of overdraft fees that can be charged per day?
- If I don’t opt in to overdraft protection, can I still be charged for these transactions?
These resources are designed to help the students transition into financially responsible adults while at college.Solly Fulp,, executive director of UC Berkeley’s University Partnership Program
You should also find out about the account’s monthly maintenance fees, and make sure it comes with a broad ATM network and good mobile and online banking platforms.
“While it’s easy to think that the best account is the one that your university seems to endorse through one of these partnerships,” Goldstein says, “it’s highly likely you’ll be able to find a better and cheaper product somewhere else.”
Better options can be found off campus and online
Before signing up for a university-affiliated account, explore your town’s other options. You might find that an account with lower fees is only a short walk or bus ride away.
We found local checking alternatives — meaning banks or credit unions within three miles of campus — with a lower overdraft fee at 16 of the 20 universities we surveyed. Six had an overdraft fee that was at least $10 lower than the university-affiliated account.
West Virginia University Employees’ Federal Credit Union, which is open to students, charges an overdraft fee of $25, $11 lower than PNC’s. In Seattle, KeyBank offers a checking account that doesn’t charge overdraft fees, while U.S. Bank, the official partner of the University of Washington, charges $36. The Twin Cities’ TruStone Financial Federal Credit Union beats TCF’s fee by $7. And in Berkeley, USE Credit Union’s fee is $8 lower than Bank of the West’s for multiple offenders.
If your financial institution offers online banking, mobile apps and live chat, you might very well not need a branch within walking distance. If you don’t necessarily prefer in-person service, consider online-only banks and other alternatives to the traditional checking account. That’s where you’ll find accounts with no overdraft fees at all; transactions that would overdraw the account are simply declined.
NerdWallet recommends Capital One 360 or Simple for college students. If you can’t qualify for those accounts, or want an alternative to checking, consider the BBVA Compass ClearSpend prepaid debit card. These accounts:
- Charge no overdraft or monthly maintenance fees.
- Have broad ATM networks.
- Provide dependable, well-regarded customer service.
Note that the BBVA Compass account doesn’t offer personal checks — but unless you live off-campus and need one to pay your landlord, this might not be an issue.
“All of these accounts are great choices for students, and each bank has its own advantages,” Goldstein says. “For example, Simple has perhaps the best mobile experience I’ve seen. Capital One 360 makes it very easy to open checking and savings accounts at the same place. Depending on where you go to school, BBVA Compass may have branches in the area. It’s just a matter of picking the best one for your own situation.”
University-affiliated banking is ripe for change
Universities can help ensure that their bank partners don’t charge excessive overdraft fees. And the government can issue regulations that makes this easier by implementing measures like the Credit Card Accountability and Disclosure Act.
The Card Act was passed in 2009 to protect consumers — college students and young adults in particular — from confusing and costly credit card company practices, including “overlimit” fees. Issuers charge these when they process a transaction that exceeds a consumer’s credit limit, to the tune of around $39 apiece. Since passage of the Card Act, issuers can process such transactions and charge this fee only if a cardholder gives them permission. Even then, they can charge only one overlimit fee per billing cycle.
And it’s working: “Had these fees continued at their pre-CARD Act level,” the CFPB says, “consumers would have paid $9 billion more from the beginning of 2011 through to the end of 2014.”
A similar opportunity exists in banking with respect to overdraft fees.
“While responsible colleges are working to protect students,” says Frotman of the CFPB, “some marketing deals between financial institutions and schools blindside students with surprise fees that can leave them on precarious financial footing.”
It might be difficult for the government to eliminate these fees for college students, but it could cap the number that university-affiliated banks and credit unions can charge per billing statement. And universities can more closely examine their banking partnerships using the CFPB’s Safe Student Account Toolkit. Released in late 2015, it aims to help schools decide whether to co-sponsor a checking or prepaid account. The bureau says that schools can use these guidelines to “evaluate costs and benefits for students, including accessing upfront information about fees, features, and sales tactics before agreeing to a sponsorship” — and it suggests schools partner with banks that don’t charge overdraft fees.
There’s nothing inherently wrong about universities teaming up with banks and credit unions. These financial institutions offer checking accounts that often eliminate maintenance fees, and with overdraft fees comparable those charged on their standard accounts. Universities, meanwhile, don’t have a duty to promote only the least expensive products. But schools do have leverage — the ability to deliver a large number of new customers — and they could use it to negotiate a better deal for their students.
“Perhaps the value the banks derive from building good relationships with people just at the beginning of their adult financial lives could outweigh the need to maximize the short-term profitability of these accounts,” Goldstein says. “Through either regulation or simple market pressure, there’s reason to hope that university-affiliated accounts will become more consumer-friendly over time.”
For now, students need to carefully scrutinize their on-campus bank or credit union and ask themselves whether it is truly the best place to keep their money. It is a skill — critical thinking — that they’ll spend four years at college developing, and it starts during orientation, when they see a promotion for their university’s official banking partner.
We looked at the banking partnerships held by some of the largest schools in the country based on total enrollment. We then turned to other notable universities that are spread throughout the country to determine whether they had similar partnerships in place. We also researched national banks to find out whether they had large networks of college affiliates (e.g., U.S. Bank’s Campus Partners program).
In most cases, data points such as monthly service charges and overdraft fees could be found on each financial institution’s website. In a few instances, the information wasn’t readily apparent, so we called the bank or credit union for clarification.
The average number of overdrafts by age group was calculated based on data from the Consumer Financial Protection Bureau’s checking account overdraft report.
The total cost of overdrafts for all full-time undergraduate students in the U.S. was calculated using data from the CFPB and the National Center for Education Statistics, as well as data on overdraft fees collected from our research on university-affiliated banks.
NerdWallet staff writers Lacie Glover, Amrita Jayakumar, Courtney Jespersen, Laura McMullen, Steve Nicastro and Teddy Nykiel identified checking account alternatives that are no farther than three miles from each university’s campus. Researchers took each school’s admissions office as their reference point and collected data for financial institutions with an overdraft fee that was lower than that of the university-affiliated financial institution. This pool of banks and credit unions was then used to determine the best local alternative for each school. In four instances, the university-affiliated account was the best option, so no local alternatives were listed.
Here are the 20 universities we looked at, their affiliated financial institutions — and some local alternatives
|School||Affiliated financial institution (overdraft/non-sufficient funds fee)||On-campus branch?||Local alternative (overdraft/non-sufficient funds fee)|
|Arizona State University||MidFirst Bank ($32.50)||Yes||Landings Credit Union ($25)|
|Florida State University||SunTrust Bank ($36)||Yes||Florida State University Credit Union ($30)|
|Indiana University||Indiana University Credit Union ($30)||Yes||N/A|
|James Madison University||CommonWealth One Federal Credit Union ($30)||Yes||N/A|
|Liberty University||Higher One ($29)||No; Higher One doesn't have any branches||Blue Eagle Credit Union ($20)|
|Michigan State University||Michigan State University Federal Credit Union ($30)||Yes||Lake Trust Credit Union ($29)|
|New York University||New York University Federal Credit Union ($25)||No, but prominently featured on the school's website||Capital One 360 ($0, option to use overdraft line of credit)|
|Ohio State University||Huntington Bank (first occurrence: $23; from then on: $37.50)||Yes||KeyBank ($0)|
|Purdue University||Purdue Federal Credit Union ($28)||Yes||Staley Credit Union ($25)|
|Texas A&M University||Wells Fargo ($35)||Yes||Aggieland Credit Union ($25)|
|University of California, Berkeley||Bank of the West (first occurrence: $26, from then on: $35)||Yes||USE Credit Union ($27)|
|University of Central Florida||Fairwinds Credit Union ($35)||Yes||N/A|
|University of Iowa||Hills Bank and Trust Company ($27)||Yes||N/A|
|University of Kansas||Commerce Bank ($36)||Yes||Truity Credit Union ($28)|
|University of Minnesota||TCF Bank ($37)||Yes||TruStone Financial Federal Credit Union ($30)|
|University of Nebraska||Union Bank & Trust ($34)||Yes||University of Nebraska Federal Credit Union ($25)|
|University of Virginia||Bank of America ($35)||Yes||Carter Bank & Trust ($25)|
|University of Washington||U.S. Bank ($36)||Yes||KeyBank ($0)|
|University of Wisconsin||University of Wisconsin Credit Union ($30)||Yes||Heartland Credit Union ($25)|
|West Virginia University||PNC Bank ($36)||Yes||West Virginia Employees' Federal Credit Union ($25)|
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