Magazine article The Hispanic Outlook in Higher Education

12 Tips That Help College Students Become Bank Smart

Magazine article The Hispanic Outlook in Higher Education

12 Tips That Help College Students Become Bank Smart

Article excerpt

When it comes to financial issues, most undcrgraduates concentrate on paying for college via student aid, scholarships, grants and loans. Studying which banks to open an account in, analyzing checking fees and comparing prices arc too lime-cons inning and cumbersome for most undergraduates.

According to a 2012 Pew Charitable Trust study Still Risky: An Update on the Safety and Transparency of Checking Accounts, students also need to consider hanking, not just financial aid. Choosing a bank with lower ATM and checking fees, avoiding costly debil card and overdraft charges and exploring credit unions can serve as a springboard for savings. Moreover, minority students face special issues since they often have less exposure to banks, and fewer bank branches in their neighborhoods.

Pew updated its 2011 study on hidden risks with a 2012 study on banking and checking accounts, based on reviewing the 12 largest banks and 12 largest credit unions. Its report stated, "There continue to be key banking practices that put consumers at financial risk and expose them to high and unexpected costs for little benefit."

Susan Weinstock, project director at Pew Charitable Trust who oversaw the study, said that "A checking account is the gateway to financial service products and to more sophisticated products. It's the starter product. Nine of 10 Americans have it." When a previous Pew report studied Latino households in Los Angeles, half of (hem had bank accounts and half didn't. Those who had banking accounts weathered the economic storm and recession better than those without.

The Pew report warns consumers that banking fees, some of which are disclosed and some hidden, can mount up and cut into savings. For example, Americans paid a whopping $29.5 billion in overdraft charges in 2011 based on fees that rose 32 percent from 2010 to 2012. The median fee for overdraft penalty is $35 at banks and ?25 at credit unions.

Banks' cumbersome disclosure forms are lengthy, written in small type and can be daunting, Weinslock said. The report recommends focusing on very direct questions to choose a bank or credit union: I) What are the basic checking fees? 2) What are overdraft fees? 3) What are the monthly fees? 4) Which fees can be waived? Weinstock noted the bottom Une is that Pew wants "checking accounts lo be more transparent, for students to understand terms of agreement and for the new Consumer Financial Protection Bureau to make checking accounts less risky."

When Karen Blumenthal, aiuhor of The Wall Street Journal Guide lo Starling Your Financial Lije, recently lauglit a business journalism class at Texas Christian University, she asked her students about their banking fees. Most had no idea how much they paid for checking and chose a bank based on proximity to campus or where they resided. "Paying attention to fees wasn't on their radar screen," she said. If students are paying $ 12 a mondi or $144 annually in checking fees and maintaining if 1,000 in their account, they're losing nearly 15 percent of their savings.

In their disclosure forms, banks and credit union often obfuscate rather than clarify fees the Pew report noted that one credit union said an account had 1:no monthly service fee" but had a "minimum balance fee," which could confuse anv consumer. Credit unions failed to disclose that tltev don't charge extended overdraft penal ties. The report said, "It would be difficult for a consumer to ascertain this without consulting an employee of lite institution."

Here are 12 tips offered by financial experts on how college students can save money, deal with financial aid and avoid or limit hefty banking fees. Some issues were directly from the report, and others were triggered by it.

Tip No. 1 : Ask about and research checking and ATM fees.

Some checking accounts are free with balances of $1,000 to $5,000. Before opening an account ask what Hie minimum balance is for free checking, ihe monthly fee for checking, and whether that includes an unlimited number of checks or arc there extra fees for writing more than, say; 10 checks a month. …

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