Magazine article University Business

Making Bank Partnerships Work: Tips for Getting the Best Deal-For a School and Its Students

Magazine article University Business

Making Bank Partnerships Work: Tips for Getting the Best Deal-For a School and Its Students

Article excerpt

Until a few years ago, a visitor to a college campus might have thought credit card vendors operated branch offices there, so pervasive was their marketing. For many students, getting their first credit card was a step toward adulthood. In the best of circumstances, students began lifelong associations with a particular bank or financial institution, and established their all-important credit history.

On the other end of the scale, low introductory rates too often gave way to skyrocketing interest. The result was students racking up thousands of dollars in credit card debt, on top of student loans and fees.

But then Congress stepped in to regulate an industry that legislators believed had grown out of control. The Credit Card Accountability Responsibility and Disclosure Act of 2009 established "fair and transparent practices relating to the extension of credit under an open end consumer credit plan, and for other purposes."

As a result, it became tougher for credit card vendors to market their cards to college students and alumni. According to a recent report by The U.S. Consumer Financial Protection Bureau, the number of agreements giving credit-card issuers the right to market their cards to students and graduates of U.S. universities fell 21 percent to 798 in 2011. At the same time, however, the revenue that colleges and alumni associations had previously received from these companies also dropped.

But students still needed access to funds, schools still needed revenue, and banks still wanted new customers. The solution was in debit and prepaid bank cards, financial products that, so far anyway, are subject to less regulation.

Done right, these bank card partnerships are a win-win. For students and families, the cards are a simple way to make sure that cash is available when needed. Schools continue to earn revenue from banks and, in some cases, receive incentives to outsource various financial and administrative functions, saving operating costs.

But, as the saying goes, with any contract, the devil can be in the details.

When considering best practices, who better to turn to for advice than a school that went through the arduous process of finding a new student banking partner just last fall? Curt Sawyer, associate vice president for university services at the University of Central Florida, says the contract with a previous partner had run its course, and there was mutual agreement to not renew.

Opening the bidding process brought interest from banks, financial service companies, and even regional credit unions, he says. "Several of them self-selected and dropped out, once they saw the full scale of the process and the relationship we were looking for."

UCF had three main requirements a partner would have to meet, Sawyer notes. "The financial aspect was obviously important to us. Budgets are tight so--make no bones about it--the financial component is crucial. However, equally important was the customer service aspect and the breadth of services offered. Finally, how seamless would the transition be for our parents and our students?"

Here are five key areas for any institution's leadership to keep in mind.

Negotiating

Students typically access funds with a bank card and the standard, ubiquitous ATM. As is the case in the consumer market, if the ATM is owned and operated by the firm issuing the card, there is no fee associated with accessing funds. However, when a "foreign ATM" owned by another bank is used, the picture changes. In addition to the fee (sometimes as much as $3) charged by the issuing bank, a surcharge (often $2) is often imposed by the other bank. For students using the cards off campus in a local college town, these fees can add Up quickly.

"I don't think it's terribly obvious to students what all the fees are," says Christine Lindstrom, higher education program director for the U. …

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