National Consumers League

Heading off to college? Banking 101 Part II


By Alex Schneider, NCL LifeSmarts and Public Policy Intern Let’s pick up right where we left off—college is expensive and making smart banking choices can save you a lot of cash in the long run. Here are a few more tips: Put your dollars to work Sometimes, despite college loans and large expenses, students find they actually make some spending money.  If that applies to you, you may want to consider saving some of it for long-term planning.  While interest rates today make savings accounts, money market accounts, and CDs unappealing for student investors with modest savings,  stock and mutual fund investing is more promising. As an aside, a general rule of investing is that your first $5,000 - $10,000 of investments should be mutual fund investments, due to the risk involved with individual stocks.  But putting a few hundred dollars per quarter or per year into stocks can be a valuable way to learn about the stock market. When opening a brokerage account, make sure to review all fees and investing rules.  Some discount brokers don’t charge monthly fees and don’t require customers to make regular purchases.  Before opening an account, consult a fee schedule and decide whether you can afford to pay the fees listed. Don’t give in when studying abroad I recently had the chance to study in Edinburgh, Scotland, and I am proud to report I never paid a bank fee to do so. So how’d I do it? American banks and credit card companies like to charge foreign transaction fees of 1%-4%, and they also tack on fees when withdrawing money at an ATM abroad. Some banks have special deals for travelers, but many of those deals are for prominent bank customers, not students without much money in savings. When heading abroad, I used information at to decide which bank to use.  As of this writing, TD Bank, a northeast bank chain, offers banking with no foreign transaction fees, as do all Capital One credit cards.  Starting in March, a few months after my return home, TD Bank started charging $2 per ATM transaction.  Still, by taking out larger sums of money at a time, students abroad can avoid paying the withdrawal fee too often. Bank of America has a network of banks that includes Barclays in the UK and BNP Paribas in France and does not charge fees to use those affiliated ATMs. In general, search for a bank with the lowest transaction fees and ATM fees.  And if you have to decide between a 3% transaction fee or a $2 ATM withdrawal fee, save yourself some money and – as long as you can do so safely - pay with cash.  Avoid at all costs For all the savings already listed, students will save the most if they remember to say one thing when opening their bank account: opt-out. Under new federal guidelines, banks must allow customers to opt-out of overdraft protection. Overdraft protection is a service that costs customers about $40 each time they become overdrawn, or spend more money than they actually have in their checking account. By opting out of overdraft protection, you won’t just save on overdraft fees, you’ll learn to manage your money and only spend what you actually have in your account.