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Just because a bank account or credit card is aimed at college students doesn’t mean it offers them a bargain.
A recent NerdWallet analysis of university-affiliated checking accounts and student-specific credit cards from major U.S. card issuers found that these financial products could cost the average student up to $1,016 in fees and interest over four years.
That dollar figure is based on other findings from the analysis, including that the:
- Median bank overdraft fee in the U.S., including university-affiliated accounts, is $35.
- Average college student’s bank account is overdrawn 2.2 times per year.
- Average late payment fee for student credit cards is $34.56.
- Average interest rate for student credit cards is 18.64 percent.
Citing a 2016 survey by the national credit reporting agency Experian, NerdWallet also reports that 58 percent of college students set to graduate within six months had credit cards. The average amount of credit card debt they carried was $2,573, and one-third of them had made a late payment.
Alternatives to costly bank accounts and credit cards
Perhaps that worst part of the $1,016 in fees and interest that the average student racks up while at college is that it’s a needlessly large expense.
NerdWallet cites online banks and credit unions as cheaper alternatives to university-affiliated accounts. For example:
“The university accounts we looked at that were affiliated with credit unions had lower overdraft fees on checking accounts and higher interest rates on savings than university accounts affiliated with major national banks. They were less likely to have monthly maintenance fees, as well.”
You don’t have to be a college student to benefit from switching to an online bank or credit union, though.
As we’ve written about many times over the years, traditional banks generally have higher overhead costs than online banks and credit unions. Those costs are often passed on to consumers in the form of higher fees and fewer free account options. That’s why avoiding big banks is tip No. 1 in “14 Ways to Avoid Paying Irritating Bank Fees.”
Tip No. 2? Shopping for an online bank:
“There may be some disadvantages to leaving your brick-and-mortar bank … But because online banks have lower overhead, they can afford to charge you less. If you shop for an online bank, you will find that the majority … do not charge monthly maintenance fees. The fees they do charge are generally lower across the board than traditional bank accounts …”
I moved my household’s savings account from a big bank to an online bank last year and couldn’t be happier. Next, I plan to move our checking account from a regional brick-and-mortar bank to an online bank.
If you’re considering switching banks, check out these articles for more tips:
- “11 Ways to Find a Bank With More Bang for Your Buck“
- “5 Simple Steps to Painlessly Switch Banks“
- “12 Great Reasons to Drop Your Bank and Join a Credit Union“
Have you benefited from switching banks? Tell us about your experience below or on Facebook.