Knowing the Rules of the Debit Card Game

Seniors: How do you manage your cash? Carrying it around in your wallet is the easiest, but not the wisest nor safest option.

One little plastic card (soon enough, using only your phone and fingerprint) can solve the problem. Time to sign up for your very own debit account.

With the wide variety of options available from different banks, it can be hard for you to make sense of which card they should choose. Not to mention it’s mind-boggling to understand all the various fees and regulations.

You may be offered a glamorous solution: Prepaid cards for your financial aid. Some schools even offer official student photo ID cards that can double as one of these cards.

Sounds easy enough, and they seem to be endorsed by the school. Be warned, though: They’re coupled with some hefty fees.

These prepaid cards seem to be everywhere. In fact, the U.S. Public Interest Research Group Education Fund has found almost 900 card partnerships between colleges and banks or financial companies.

Rich Williams, co-author of the report and higher-education advocate for U.S. PIRG, explains that although these partnerships help schools bring in the needed funds, the arrangements aren’t always in the best interest of students.

Instead of being able to access their money freely, their financial aid is eaten up in fees.

The U.S PIRG Education Fund’s report details the drawbacks:

• One bank charges a $28 overdraft fee for each day an account is overdrawn, for up to 14 days.

• Students using prepaid debit cards can be charged for reloading or depositing money on the cards at ATMs. At one school, the reload fee is $4.95.

• One company charges students 50 cents if they swipe a card with a MasterCard logo, choose the debit option and enter their personal identification number. They don’t get charged the fee if they use the credit option and sign the receipt.

• Under one deal, a student debit cardholder can be charged a $10 fee if another person tries to load money onto the student’s card electronically but the transaction is canceled because the other person’s bank account has insufficient funds.

• Students can be assessed a fee when they check their balance at an ATM. One institution charges 60 cents per inquiry. This does not include charges potentially assessed by the ATM owner

• Access to student financial aid funds placed on debit cards can be subject to limited availability of “convenient” fee-free ATMs for student loan withdrawals despite U.S. of Department of Education rules. Students end up paying fees to access their aid.

You may be understandably new to banking, and some of these rules will seem foreign.

Stay informed. Marketing tactics, the ease of directly depositing your financial aid (or immediate reimbursement for overages), and the assumed endorsement by your school may convince you not to look any further than the prepaid or debit cards offered on campus.

Make sure you aren’t paying high fees to access your money, and remember: Always be wary of debit cards that allow you to load grant or loan money. It’s never as good as it seems.

Learn how Westface College Planning can help you navigate the college planning process from start to finish. Give us a call at 650-587-1559 or use our contact form. Our workshops and webinars are also a great place to start.

_{Photo Credit: Judy Van Der Velden}