The new culprit on college campuses: Debit cards
College students, you have an admirer, and it’s not the cutie in your philosophy class—it’s credit and debit card issuers.
In fact, card issuers want your business so badly that they paid $83.5 million to colleges and alumni associations last year just so they could market their products to you, according to a Federal Reserve report. After all, if they’re the only plastic supplier on campus, they can sucker students into signing up for less-than-stellar deals.
And it’s no longer just credit card issuers who are hungry for your business—it’s debit card issuers, too. An article by Ylan Mui in The Washington Post revealed that some colleges require students to have a campus ID that also serves as a debit card. Some of these debit cards charge high swipe fees every time you use them; others are linked to your student loan account, making it dangerously easy to access that money “everywhere from the bookstore to the bar,” Mui writes.
These practices are legal (ugh!), but there are a few problems here. First, there’s often little transparency, so students don’t realize that those debit card issuers or banks paid for exclusive rights to market on campus; instead, it seems like an endorsement from the school. Second, these accounts are often more expensive than others for which students could qualify. Plus, students are sometimes pushed into using these cards, like when they double as ID cards, giving it an unfair advantage.
If you’ve already signed up for a debit card, ask yourself these 3 questions to see if you’re getting a good deal:
1. What are the monthly or annual fees? Is your bank charging you a monthly fee? If so, how does it compare to other fees for similar cards? Use bankrate.com to check.
2. Are there fees when you make a purchase? Some cards’ “swipe fees” are as high as 50 cents or a dollar. That might not sound like a lot, but if you’ve got a busy weekend, you could easily rack up $5-$10 in fees, which adds up to hundreds of dollars a year.
3. What is the overdraft policy? Banks are no longer allowed to enroll you in overdraft protection on your debit card unless you state that you want this service. Basically, overdraft allows you to charge more than what you have in your account—for a hefty fee. It’s a costly service, and one I don’t recommend. Without it, your card will be denied and you’ll have to find an alternative way to pay, but you won’t be charged a fee.
Do you or your college-age kid attend a school that pushes debit cards?