How Not to Move Back in With Your Parents

Financial Literacy 101 Podcast Episodes

Banking for College Students
Banking

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Pete and Alex along with Sheriff Jack Tharp talk about banking while in college.



Read the Show Notes
Smart Banking Starts With a Checking Account

Probably the first financial decision you made (with the help of your parents) was establishing a savings account at a home bank. Setting up a checking account used to be a rite-of-passage for teenagers, but now has been superseded by plastic.

A report released this year, entitled, Money Matters on Campus, noted that students who had checking accounts were more likely to buy only things they needed, follow a budget, and pay their credit card balance in full each month. Yes, this lesson is about getting a checking account if you don’t have one.

Not surprisingly, a checkbook can help keep you in “check” [pun intended]. It’s a tool that keeps income and expenditures front and center. The Money Matters report also revealed that students with checking accounts had less financial stress and as graduates were much better at paying student loans on time.

What You Need to Know About Banking Practices

What do you need to know about banking practices while in college? Services….are you receiving standard market place services? What you really should ask, is the fee structure good or bad?

Banks have to make money and they have a lot of interesting fees these days.

For example, banks like to see the regular flow of income into your account…so if you work, make sure to have your pay direct deposited; it is a way to have various fees waived.

Some banks charge a fee if the checking account balance falls below a minimum dollar amount; a subtle reminder they want you to be able to always cover your expenditures. Conversely, banks are willing partners in giving you extra margin when you overspend, but to have “over-draft” protection comes with a fee.

A typical bank charge for a bounced check is $35; did you know the merchant can do the same. You don’t want to end up paying $70 for a $16 mistake. In general, maintaining a cushion in your account is a good idea.

One of the more irritating down sides of checking is when you deposit a check; banks want to make certain the money is good and often the waiting period to see your account balance go up is 2-3 days.

Say Yes to Debit Cards...and No to ATMs

A debit card linked to your checking account is another practical tool; just remember to make an entry in your checkbook for every withdrawal.

A debit card, which represents your money, is nonetheless a device for banks to generate revenue. You can be charged a fee for having a debit card and also charged a fee for every time you make a withdrawal or more withdrawals than a predetermined limit. If you rely on a debit card, look for a bank with minimal fees.

Beware the ATM. If you want to rack up bank fees fast it can happen due to ignorance on how these money-spewing machines work.

When you use an ATM that is not one of your bank’s, it likely will cost $2 - $5 per transaction. And your bank might even charge you for using another banks ATM---the cost of loyalty.

Have you noticed there are few ATM’s at Indiana University? The principal reason is that the University is committed to a cashless environment in all student related transactions and also for student safety; the fewer the machines the easier to police.

Your bank, in making you feel special, may have also issued you a credit card. It too can be used at an ATM.

If you remember anything from this lesson, it is to recognize that securing cash from your credit card is the same as a bank loan even it if is $20. You will be charged a fee for a cash advance and often the interest rate on the cash is higher than other purchases on the card.

The only time to use a credit card for cash is when you don’t have the money in your checking account [insufficient funds fee = $35].

Look for Checking Accounts Designed for College Students

Most banks have special deals for college students, such as no fee checking accounts. Remember, banks want loyal customers; they actually try to build relationships even if you never have to step in the building.

If your home bank doesn’t have a branch near the campus, consider a new 4-year banking relationship while enrolled. It may make a big difference for personalized service, if you ever have a problem. Remember, asking a customer service representative to waive fees and have it happen is the practice of negotiation, which of course you will later list on your resume.