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In college, the learning doesn’t stop when you leave the classroom. You’ll also be tested when it comes time to find the right place to bank.
College students today are often burdened with considerable debt, due to the high cost of college, which has nearly tripled since 1980. The average cost of attending a four-year private university was $39,400 for the 2022-23 school year, according to CollegeBoard. Choosing the right bank account can help students avoid even more financial stress by mitigating bank fees and helping them manage their finances more effectively.
“Look at everything that’s available and choose the right account,” says Peter Gwaltney, president and CEO at the North Carolina Bankers Association, who has sent six children to college. “It’s just a tool. And you need to have the right tool for what you want to do and who you are.”
Here are five tips to help you choose where to bank while in college.
- Six-in-10 degree-holders say that having a degree has benefitted both their salary and career growth. (Bankrate)
- Of all U.S. adults with short-term savings, 55 percent do not have an account with an online bank. (Bankrate)
- Of those who do not have an online account, 46 percent say they prefer a local branch, 41 percent say they’re comfortable with their current branch and 30 percent are worried about the security of their money. (Bankrate)
- While the national average rate for savings accounts is 0.58 percent APY, top online banks are paying up to 5 percent APY or more on savings. (Bankrate)
- A majority (61 percent) of college students have less than $1,000 saved in a bank account, while 21 percent have less than $100 in the bank. (Neighbor)
- Almost half (47 percent) of college students either have no savings account or have a savings account but no money in it. (Neighbor)
1. Avoid high bank fees
Look for a bank that offers convenience and either doesn’t charge fees or makes them easily avoidable.
Some of the most common account fees — and fees that can be avoided — include:
- Monthly maintenance fees
- Fees for falling below a minimum balance requirement
- ATM fees
- Overdraft fees
When it comes to monthly fees, there are plenty of banks that either don’t charge them at all or waive the fee when certain requirements are met, such as maintaining a certain balance or setting up direct deposits for the account. Make sure you can meet these requirements, or look for an account with more tenable requirements.
It should be easy to find an ATM when you need cash, but make sure your bank reimburses some or all out-of-network ATM fees. If not, find a bank that has an ATM nearby. ATM fees average $4.66 for each out-of-network withdrawal, according to Bankrate’s 2022 checking survey. Making withdrawals several times a month can add up in costs if you don’t have an account with ATM fee reimbursements or convenient in-network ATM access.
Money tip: Another way to avoid fees to access cash is at the store, Gwaltney says. Many grocery stores, convenience stores and pharmacies let you receive a limited amount of money from your account when you make a purchase using your debit card.
Finally, be mindful of overdraft fees — some of the most lofty bank fees, which can often be more than $30 per overdraft. These fees are more likely to affect those with less money in their accounts, as reported by the Financial Health Network. If you’re a college student living paycheck to paycheck, you might not even realize you don’t have enough funds to cover an expense and end up getting charged. Many banks and credit unions, such as Ally Bank and Capital One, have taken steps to significantly reduce or eliminate overdraft fees altogether.
2. Consider online banks
For some, branch access may not be as important as ease of online access and cutting-edge technology. Plus, managing day-to-day affairs through digital means is often what’s familiar to younger people.
According to a Bankrate survey of U.S. adults with checking accounts, 16 percent of Gen Zers said that user-friendly internet banking and mobile apps are most important when considering where to bank; 13 percent of millennials said the same thing.
Paul Collinson, CFP, a founder of Legacy Planning Advisors in Virginia, recently helped his two children find bank accounts while in college. “What has been important is a robust ATM/debit card paired with account access via cell phone and laptop,” he says.
A considerable advantage of online banks is they generally come with fewer fees and lower minimum balance requirements, while paying much higher yields than traditional banks. However, it’s still important to look for accounts with in-network ATM access nearby or ATM fee reimbursements so you can take out cash without getting charged those out-of-network ATM fees.
Some other things to look out for in an online bank are:
- Whether the bank is federally insured
- Rates offered
- User-friendliness of mobile banking app
- Payment transfer options (such as Zelle)
- Budgeting and financial management tools offered
3. Look for paired savings accounts
Also important is that the bank pairs the checking account with one or more savings accounts. That way the kids have an opportunity to explore the concepts of setting funds aside for near and for long-term goals.
— Paul Collinson, CFPA founder of Legacy Planning Advisors
Having a savings and checking account at the same bank can make managing finances more convenient. Both accounts can be accessed in the same place, transfers can be made easily between the two, and there may be special features that come with having both accounts at the same bank.
One common feature, for example, is automatic savings, which analyzes customers’ finances to determine how much can be automatically saved each month. Frequently, customers need to have both their checking and savings accounts with the same bank to take advantage of this tool.
Another reason to consider savings and checking accounts at the same bank is that it may offer “relationship” benefits for having multiple accounts with it, such as waived monthly fees or higher APYs. At PNC Bank, for instance, customers who open a Performance Checking account get the monthly fee waived on a linked PNC savings or money market account.
4. Research student accounts
As a college student, you’re not likely to keep large balances at your bank. That’s why some banks offer students accounts without a minimum balance requirement.
Many traditional banks offer student checking accounts, which generally don’t have maintenance fees and are typically available for students under 24 years old. You may need to prove that you’re a student to get one of these accounts.
Even though student checking accounts usually don’t have fees and balance requirements, be sure to read the account’s terms and conditions. Also, make sure you understand when the account will convert into a standard checking account. It may start automatically charging a monthly fee once the student qualification rule expires.
“I think that folks should be looking at the fine print just to understand, ‘How does this work?’ And parents should be looking at it with their students,” says David Principe, a certified financial planner and wealth manager at SageBroadview Financial Planning, who has two children in college.
In some cases, a student account may have all the features you’re looking for. But it’s smart to research other options with low balance requirements and ATM accessibility.
What to look for in student bank accounts:
- Low/no fees
- Low deposit requirements
- Mobile banking tools
- When the account converts to a standard, non-student account
5. Understand the account features
Before you open an account, make sure you fully understand the terms and conditions. Minimum balance requirements and overdraft policies are two of the most important things to note.
Decline overdraft services if you have a proper backup plan in place and ask about what happens when a transaction is declined. A credit card can cover you in an emergency, though it’s important to be careful with credit card use.
Savings overdraft protection, which transfers money from your savings account to back up your checking account, may have a lower fee than standard overdraft.
Also consider common transactions you’ll be making, such as receiving money from your parents and sending money to a roommate or friend. See what tools are offered for conducting these transactions. Many banks’ mobile apps come with Zelle for peer-to-peer payments. See the full list of banks that offer Zelle.
Many banks and credit unions also offer online or mobile check deposits. This allows you to deposit checks without going to a branch, and it is especially helpful if you choose a bank that doesn’t have branches nearby.
While it’s important to prioritize finding a bank where you won’t pay loads of fees and that’s easy to access, the unique features of an account can make or break your decision to open it. These features are what ultimately help you manage your money and can add convenience to doing everyday transactions, including depositing checks.