The larger national banks have the benefits of name recognition and accessibility. You can access them most anywhere including nearby branches, grocery store kiosks, or on campus. This makes it easy for parents to make deposits and for students to access cash. On the downside, many larger institutions have stopped issuing free checking accounts, and ATM fees are on the rise. Be sure to check the fee schedule to see how much the account may be charged for going below the minimum balance and for ATM withdrawals.
Local community banks continue to compete favorably with the big banks. Many of these banks still offer free checking to keep their client base. There are often few branches, but that means that you stand a better chance of getting to know the employees. When they know you, it can be easier to transact business. So, if your student goes over their checking account limit, a quick phone call may help resolve the issue. Since there are not as many branches and ATMs available, community banks will often waive fees for using foreign ATMs. This helps alleviate the inconvenience factor.
As member-owned cooperatives instead of for-profit entities, Credit Unions may offer higher interest rates on deposits as well as no-fee accounts. As with community banks, fewer branches and ATMs often mean lower fees for ATM usage. One caveat is that you need to be affiliated with a “field of membership” such as a specific employer, church, school or community. Ask your family to see if they have a relationship that would qualify you to use a credit union.
Online banking began with the technical revolution in the 1980s and has greatly evolved since then. While many brick and mortar banks have an online presence, there are several FDIC-covered institutions that operate only in the cloud. The lack of a branch system is its strength – without the overhead, they can pay higher interest rates on checking and savings accounts. Most offer direct deposit and no-fee ATM usage as well as 24/7 service. And the Gen Y crowd is used to having an internet connection for everything. The downside here is the disconnect between money earned and money spent. A “new” accountholder needs to see a check, make a physical deposit, write checks, and use the ATM to really understand how to budget money. If not, the numbers are intangible and there is a greater chance that your student will not learn to manage her money. When money “magically” appears in an account, it is just as easy for it to “disappear.”
Choosing the Right Account
As your child goes off to college, whether it is across town or across the country, work with him to decide what services will be most important. New banking rules and regulations are causing changes, so be careful to check the fee schedule and ask your Customer Service Rep if they know of any upcoming changes that may affect the account.
Our society has become very accustomed to free banking services, but remember that banking is a privilege, not a right. Many banks charge fees for smaller accounts that used to be free. If students manage their money well, the fees will be minimal. If they do not, the fees can eat up all their pizza money. Here are some links to help you and your student find and maintain a student checking account.
findabetterbank.com – Enter your account criteria to find accounts that will suit your needs.
ABC News Report – How to Get the Best Deal When Opening Your First Checking / Savings Account
Anytime Advisor Checking Account Coach – Learn how to use a checking account.
College Finances – The Basics and Beyond – FPA Blog