When you’re in college, learning extends beyond the classroom. One of the essential lessons is managing your finances effectively, and a crucial aspect of that is selecting the right bank. The cost of college has skyrocketed in recent years, leaving many students burdened with significant debt. For the 2022-23 school year, the average cost of attending a four-year private university stood at a staggering $39,400, as reported by CollegeBoard. To avoid additional financial stress, choosing the right bank account becomes paramount.
In this article, we’ll explore key strategies for college students to make informed decisions about their banking choices, ensuring a smooth financial journey during their academic years and beyond.
Before delving into the specifics, it’s crucial to understand the broader context of college finances. Here are some key statistics:
- Unlocking Career Potential: Six out of ten degree-holders report that having a degree has positively impacted both their salary and career growth (Bankrate).
- Online Banking Trends: Surprisingly, 55 percent of U.S. adults with short-term savings do not have an account with an online bank (Bankrate).
- Branch vs. Online: Among those without online accounts, 46 percent prefer a local branch, 41 percent are comfortable with their current branch, and 30 percent worry about the security of their money (Bankrate).
- Maximizing Savings: While the national average rate for savings accounts hovers around 0.58 percent APY, top online banks offer up to 5 percent APY or more (Bankrate).
- Saving Challenges: A majority of college students (61 percent) have less than $1,000 saved in a bank account, with 21 percent having less than $100 in their account (Neighbor).
- Savings Account Gaps: Alarmingly, almost half (47 percent) of college students either lack a savings account or have one with no funds (Neighbor).
Now, let’s explore some actionable steps to optimize your college banking experience.
1. Avoiding High Bank Fees
One of the first considerations when choosing a bank is minimizing fees. Look for a bank that offers convenience and either doesn’t charge fees or makes them easy to avoid. Common fees to watch out for include:
– Monthly Maintenance Fees
– Minimum Balance Requirements
– ATM Fees
– Overdraft Fees
Many banks either offer fee-free accounts or waive fees when certain conditions are met. These conditions might include maintaining a specific balance or setting up direct deposits. Ensure you can meet these requirements or find an account with more attainable conditions.
Additionally, easy access to ATMs is vital. Find a bank that either reimburses out-of-network ATM fees or has an ATM nearby. Frequent out-of-network withdrawals can accumulate substantial costs. According to Bankrate’s 2022 checking survey, ATM fees average $4.66 per out-of-network withdrawal.
2. Considering Online Banks
For some students, branch access may not be as crucial as online accessibility and cutting-edge technology. Online banks often offer:
– Fewer Fees
– Lower Minimum Balance Requirements
– Higher Yields
Online banking is particularly familiar to younger generations. Look for accounts with in-network ATM access or ATM fee reimbursements to avoid out-of-network ATM fees. Other factors to consider include federal insurance, interest rates, mobile banking app usability, payment transfer options (like Zelle), and financial management tools.
3. Exploring Paired Savings Accounts
A smart strategy is to seek banks that pair checking accounts with one or more savings accounts. This allows students to practice saving for short-term and long-term goals effectively. Having both accounts at the same bank offers several benefits:
– Convenient Account Management
– Easy Transfers Between Accounts
– Special Features
Some banks provide automatic savings, analyzing your finances to determine how much you can save each month. Often, this feature requires having both a checking and savings account at the same bank. Additionally, having multiple accounts with the same bank may lead to “relationship” benefits, such as waived fees or higher APYs.
4. Researching Student Accounts
As a college student, you’re unlikely to maintain large balances in your account. Many traditional banks offer student checking accounts without minimum balance requirements. These accounts are typically available for students under 24 years old, with no maintenance fees.
However, read the account’s terms and conditions carefully. Understand when the account transitions to a standard checking account and starts incurring monthly fees. Research other options with low balance requirements and convenient ATM access.
5. Understanding Account Features
Before opening an account, grasp the terms and conditions, especially minimum balance requirements and overdraft policies. Decline overdraft services if you have an alternative plan in place. Consider using a credit card for emergencies, but exercise caution with its use. Some banks offer savings overdraft protection, which incurs lower fees than standard overdraft.
Moreover, investigate the tools for common transactions like sending and receiving money. Many banks provide mobile apps with peer-to-peer payment options like Zelle. Check if the bank supports online or mobile check deposits, which can be extremely convenient, particularly if the bank lacks nearby branches.
Choosing the right bank is a pivotal step for college students on their financial journey. While avoiding fees and ensuring accessibility are essential, the account’s unique features can make a significant difference in managing your money efficiently. By following the tips outlined in this guide, you can navigate the world of college banking with confidence and financial well-being.