New students should look closely at college-sponsored bank accounts and shop around

If you’re a student starting college for the first time or transferring to a new college, you may be busy meeting new roommates and going through orientation. During these first few weeks, you may also need to get a checking or prepaid debit account.

On campus, a bank account may be marketed to you that is co-branded with your college’s logo and may be attached to your campus ID through a debit card. But remember, just because an account has been sponsored by your college, it doesn’t always mean that it’s a good deal for you.

Since we launched our Safe Student Account Scorecard project earlier this year, we’ve been talking with students, colleges, and financial institutions to better understand what students need to know before they pick an account. Many colleges partner with financial institutions to sponsor banking products. In some cases, companies pay colleges millions of dollars in exchange for exclusive marketing arrangements. Colleges may also negotiate with companies to offer products that have lower fees or better terms than what students could get if they asked for the same deal on their own. However, a report by the Government Accountability Office revealed that many college-sponsored accounts were no better than what students could find themselves after shopping around, and in fact, were sometimes worse. To spur greater transparency, we have called on companies to publish their arrangements.

We know that it can be time-consuming for you to understand all of the details in the student account offered through your college. Keep these three things in mind so you can set yourself up to make a smarter choice:

• 1. Just because an offer looks like official mail from your college, you don’t have to accept it. Some colleges take steps to promote products through official email and mailings, and sometimes are compensated by banks for their efforts. For example, a college might use its official email communications with incoming freshmen to promote a sponsored account by encouraging students to use the “hot new” campus ID from its bank partner. A college may also choose to use printed materials at orientation or other official communications in order to highlight a banking partner, or may offer an official session at orientation to be presented by the financial institution.

• 2. Some staff on campus may work for your college’s banking partner. It’s always okay to ask questions when you’re deciding whether to open an account. Officials at your college can help you understand product terms and features in order to make an informed choice, but you should also ask questions about who you’re talking to. For example, a bank might provide in its contract that it will lend bank employees to staff the student ID card office. Your college may also rely on bank employees to promote an official campus student ID that can be linked to a checking or prepaid debit account during new student and parent orientation, allowing bank employees to market their financial product in a role traditionally filled by college administrators.

• 3. Your college may get paid when you open an account. We’ve heard that some companies may pay colleges a fixed amount for each student that opens and uses the college-sponsored account. You should ask questions about how your college gets paid and keep in mind that if you feel rushed or pressured into opening a college-sponsored account, it might be because your college wants to sign you up to maximize its revenue under the deal.

How could this impact the fees you pay while in college?

As we have warned students in the past, the financial products you use can contain high fees. In fact, other banking regulators have fined and required that restitution be paid by providers of college-sponsored accounts for alleged unfair and deceptive practices over fees charged to students, including an over $11 million settlement between the Federal Deposit Insurance Corporation and the largest provider of college-sponsored accounts.

Ultimately, the account you select can support your saving goals and help you avoid fees. Many banks offer programs to help you manage your spending and saving. Taking advantage of free account alerts through email or text message can help you avoid overspending, as can simply keeping track of your purchases and withdrawals and monitoring your account balance regularly.

If you have a problem with your student checking account, you can submit a complaint. If you just want to share your experience with student checking accounts and debit cards, tell us your story and select “campus debit card” under the “Tag your issue” field.

Check out our checklist for opening a bank or credit union account . If you have more questions about student checking accounts, check out Ask CFPB, our online, database of frequently asked financial questions and answers.

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