By: Dan Kadlec
August 9, 2012
Back to school: How to vet student bank accounts
If you have ever looked for the perfect bank account for your teen, you know how frustrating the search can be. Linked accounts, transfer limits and fees, ATM fees, overdraft protection and more vary from bank to bank and from account to account. How do you sort through this maze?
It's not easy and you can count the researchers at Pew Charitable Trusts among the baffled. In a new report on student checking accounts, Pew's chief recommendation to the banking industry is this:
"Given the wide range of checking account options and fee waivers provided to students, more transparent disclosures are particularly relevant to allowing students to comparison shop. Financial institutions should lay out in a simple, clear format the fees, terms, and conditions of each type of account so that students can easily choose the account that is most appropriate for them."
Amen. But the report does answer at least one important question: Are student checking accounts worth it? With school just around the corner, it's comforting to know that, yes; in general student account monthly fees are lower than the basic accounts most adults are offered.
Nearly 60% of the financial institutions examined offer accounts explicitly marketed to high school and college students, and teens. More than half of the student accounts have either no fees or monthly fees that are lower than on basic accounts, which typically cost $2 to $12 a month. Virtually all others have fees equal to basic accounts.
So if the choice is between a student account and a basic account, take the student account and you'll be fine. You can further cut the costs of these accounts by going paperless. Some student accounts charge up to $3 a month for paper statements.
ATM fees are another area where students must be careful. According to Pew, some banks waive any fees for using another institution's ATM while others offer only a partial waiver. You may be entitled to, say, three out-of-network ATM transactions a month before getting hit with $2.50 per withdrawal. This is a critical comparison point.
Finally, the study turned up a wide range of policies with student accounts as they relate to overdraft fees. Some banks discount the standard overdraft fee for students from, say, $35 to $15. Others allow for one overdraft per year or per life of the account with no charge. This too is a key comparison point.
As I said at the top, finding the perfect bank account for a teen is no easy task. To keep it simple and safe, start with student accounts and then focus on ATM and overdraft fees. You'll find something you like.