“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.

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.

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.