March 2015 report from Center for Responsible Lending highlights the dangers of overdraft checking account fees for college students:
- Many student bank accounts have abusive overdraft features that are no better (and sometimes worse) than what students could find on their own.
- Young adults are more likely to overdraw their accounts (see page 14 for distribution of overdraft fees by age). These overdrafts are both expensive, often $35, and easily preventable by the bank, which could simply decline the transaction.
- The heaviest student overdrafters are at risk of paying more in overdraft fees with many of these accounts within a year than they will pay for textbooks and other course materials – about $700.
So, what advice should you give that incoming college frosh?
“Just say NO to….overdraft protection.” It could lead to some embarrassment at the checkout counter if you don’t keep close tabs on your account balances, but will avoid those pesky $35 fees. Besides, that public shaming of having your debit card transaction denied might just be the motivator you need to track your account balances more closely and set up automatic text alerts once your balances fall below a certain level!
Check out this NGPF Lesson on Checking Fees!