October 17, 2013
Managing College Student Finances at a Credit Union
Despite his best of intentions, University of Florida junior Tyler Reeves ended up hitting his own personal debt ceiling, maxing out his credit card and emptying his bank account--and it’s only October.
His mother, who said that her son hasn’t always been the best with tracking money, really hit an all time low with the latest financial debacle. “I couldn’t believe it when I saw the bill,” says Barbara Reeves, a Boca Raton, Florida attorney. “What could he have spent $800 dollars last month on? This is his debt that he will have to address but for now he’s back to getting a small allowance.”
Unfortunately stories like Reeves’ aren’t few and far between. The U.S. Public Interest Research Group Education Fund, issued a report last spring titled “The Campus Debit Card Trap” that cited how mounting fees for performing simple tasks and transferring money can consume a good portion of students’ budgets. Additionally report authors found that some students were even paying bank fees with money from federal student aid.
As students and parents become more educated on how to manage finances during the college years, the Federal Deposit Insurance Corporation settled a lawsuit against two banks for “unfair and deceptive practices” last year. More information continues to come to the forefront about not only unfair practices but ways students and parents can get a handle on their college student’s cash.
Why Has It Gotten So Tough For Kids to Manage Money?
One reason why more students seem to be out of control with money may be due to higher accessibility to cash. With online banking, mobile banking and point of sale transactions, having access to cash 24/7 is as easy as a click of a mouse or a button.
Additionally, sneaky bank fees are designed to be just that--sneaky. Preoccupied college students may not investigate every aspect of a checking account or Visa card and simply sign up and use the product or service without reading the fine print. Unless every aspect of the account is explained up front or is designed specifically for the student, mounting fees can become overbearing and can wipe out even the most robust account in less than a month.
Finally, some kids may open products and services they may not need. Some banks have employee cross sell incentive programs that motivate staff members to push certain products or services, sometimes regardless of whether the customer needs it or not.
Good Solutions For College Students
The first step students should take is to seek out their local credit union to inquire about a student-based account program. Not only will most local credit unions have custom programs for students, many college based credit unions offer special programs as well. For example, Michigan State University Federal Credit Union ($2.4 billion, East Lansing, MI) has a free Totally Green Checking account with no minimum balance requirement and no monthly service fees. The credit union also has programs customized for students at a variety of stages ranging from incoming and current college students to graduate students or those who choose to study abroad.
Parents should also shop around for an appropriate credit card for their college student. Anisha Sekar, VP of credit and debit products for NerdWallet.com suggests investigating a credit card like the Visa Platinum Secured card from Digital Federal Credit Union ($4 billion, Marlborough, MA). This fee-free credit card allows you to borrow against what you have in your credit union savings account so it is harder for the student to run up a huge loan amount without having the resources to pay.
Additionally, build a relationship with your credit union. A vast number of members report finding a better solution to debt or financial trouble or questions when they have a relationship with their credit union. For example, when one of Community First Credit Union’s members ($2 billion, Appleton, WI) was drowning in debt after suffering a medical setback, he turned to his credit union for help.
Michael King, manager at Community First wrote in his local paper about the member’s experience. “With payments due and fearing the worst, they stopped in to see the assistant manager at the Community First Credit Union branch they had joined a few years earlier for a vehicle loan. Using the equity in a vehicle, they were able to get a consolidation loan to pay off the credit-card debt and significantly reduce their monthly payments. The manager also took the time to help the couple create their first household budget.
After just going over the budgeting and the payments, you could see the weight lifted off their shoulders, and he was crying,’ the assistant manager said.”
If you have questions about your child’s college account, find a credit union and inquire about student-based programs.
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