From their very first day at college, many students will be paying fees to banks. Financial institutions—some of which have exclusive marketing rights on particular campuses—steer students into signing up for additional campus bank accounts that may charge high fees for accessing cash at ATMs and other common transactions such as purchasing books and meals. In many cases, the fees are more than those that ordinary consumers typically pay for similar transactions using a regular bank account.
Today, Consumers Reports has made public a report with details of the often excessive fees that banks and other financial institutions charge students. The report, Campus Banking Products, illustrates how colleges, by granting financial firms exclusive contracts to co-branded banking products, often restrict choices and produce higher fees for students. By embedding some of those banking products into everyday items such as Student IDs, students may be led to erroneously believe that using other products from those banks, such as financial aid, is in their best interest.
Read the report from Consumers Union.
For heavy campus card users, the fees rack up at an ever-increasing rate. One of the major findings of the report was that heavy users of campus accounts could pay substantially higher annual fees than students who use them infrequently. For those students who use a campus account as their primary account, fees can amount to hundreds of dollars a year.
And students may incur fees that most consumers don't, such as point-of-sale PIN fees, a fee for making a purchase. Nor is leaving the campus financial arrangement cost free: If students stop using the financial products, some firms assess inactivity and account closing fees.
Consumers Union, the policy and advocacy arm of Consumer Reports, is recommending, among other remedies, that the Department of Education make it easier for students to choose direct deposit to an existing account to receive their financial aid, and even consider disbursing financial aid directly, via a government-administered card. Similar cards, such as the Direct Express card the Treasury Department uses to disperse Social Security benefits, would encourage competition among financial firms to provide a low-cost financial product to students. —Chris Horymski
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