Some banks are paying colleges to help boost the number of students who bank with them.
Universities in need of quick cash aren’t above throwing their students under the bus.
Take, for example, the University of Minnesota. TCF Bank pays the school more than $1 million a year to recruit students as customers, ABC News says. It gives the school a bonus payment of $34 for each student who signs up for a checking account. More than eight in 10 freshmen sign up for an account, possibly for the free school sweatshirt with a $50 deposit, or maybe because their student IDs can double as ATM cards there.
The bank makes that cash back in a flash. “The TCF Bank account charges students $37 each time they swipe their debit card and try to spend more money than they have in their account,” ABC News says. Half of young adults overdraw their accounts every year, and do so seven times on average — more than covering the kids who quickly learn to manage their money.
This sort of arrangement is becoming common. There are more than 900 agreements between colleges and banks, ABC News says. Students and parents are often unaware of them. The Consumer Financial Protection Bureau has been investigating them since early this year. Last year, the FDIC fined Higher One and The Bancorp Bank and made them repay $11 million to college students for unfair overdraft fees.
If you have a student headed to college, help them shop around for a student-friendly account with few or no fees and nearby ATM access. (I know from experience that not all freshmen have cars, so ATM access is important, especially when a bank claims exclusive rights to your stomping grounds.) The campus bank doesn’t necessarily have the students’ best interests in mind.