- College students often have access to “no-fee” checking accounts, but to truly avoid fees, it’s essential to understand requirements such as maintaining a minimum balance and ATM fees.
- Banks will often try to sell you add-on services with high fees, such as overdraft protection.
- If you are charged a fee, call or chat with your bank to politely ask if they can waive the fee and find out how you can avoid it in the future.
College is a great time to start building a credit history and thinking about your financial future. You might be receiving income from a part-time job or using a credit card for the first time. If you understand the risks and responsibilities, you’ll be well on your way to financial literacy (a.k.a. having the skills and knowledge to manage your money) by the time you graduate.
However, you have to be mindful about how you use tools like checking accounts and debit cards so you can steer clear of unexpected fees. Knowing how to avoid unnecessary bank charges can add hundreds of dollars to your bottom line every year.
According to a CNBC report, the average US household loses almost $250 per year due to avoidable fees such as overdrafts and late payments—but that burden isn’t distributed equally.
“Many first-generation college students are from communities where traditional banking services are not available,” explains Theodore Daniels, founder and president of the Society for Financial Education and Professional Development.
Even worse: “Nontraditional financial services are marketed to communities of color, which are more expensive and subject them to financial exploitation because of predatory interest rates and fees.”
Bankrate surveyed 2,600 adults about their average monthly fees and found that younger adults and people of color tend to pay significantly more in banking fees. White survey respondents reported the lowest checking account fees on average: just $5 per month, compared to $12 for Black respondents, $16 for those who identified as Hispanic, and $8 for all others.
“Some students may be reluctant [to begin a banking relationship] due to cultural reasons or based on family experiences,” says Dr. Stephanie Yates, director of the Regions Institute for Financial Education at the University of Alabama at Birmingham. “Students should conduct comparison shopping to find banking services that meet their needs with reasonable fees.”
The reality is that discrimination in banking is a systemic issue and just one of many examples of how racial inequality pervades our institutions. While there is much work to be done to eliminate discriminatory banking practices, there are ways you can start taking control of your finances today. Use these tips to avoid paying unnecessary bank fees so you can work towards a stable financial future.
Many schools partner with local banks (or larger financial institutions with local branches) to give students access to a no-fee checking account with ATMs on or near campus. Some banks offer no-fee checking accounts for students in general, regardless of what school they attend. If you’re currently paying an annual or monthly account “maintenance” fee, contact your bank and ask if they offer a student checking account.
“Upon learning I was being charged monthly fees, I immediately called my bank to tell them I was currently a student. They asked for my confirmation of enrollment and I was able to avoid monthly bank fees.”
—Husna H., fifth-year undergraduate, Kwantlen Polytechnic University in British Columbia, Canada
Joining a credit union is another common way to get a no-fee account. The primary difference between banks and credit unions is that banks are for-profit institutions, while credit unions are nonprofit. Many credit unions exist to serve specific communities such as university systems. The actual process of joining a credit union is generally similar to setting up an account at any bank, and you still need to be careful to understand any requirements and costs associated with their services.
“I had to schedule a meeting with someone who worked at the bank to explain how to navigate avoiding charges. I ultimately switched to a credit union. Learn how to speak with those who work within these institutions and feel comfortable asking questions.”
—Kelly L., doctoral student, California State University, Northridge
If you are charged a fee…
If you aren’t sure why you were charged a fee, contact your bank and ask. Find out what you can do to make sure you don’t end up paying the same fee again.
“Always call the bank or credit card [company] to acknowledge the fee and seek clarity if you truly don’t understand why you were charged. Maintain a professional and peaceful attitude towards those dedicated to providing you customer service. Last, always ask, ‘May I put in a request to waive the fee, please?’”
—Jasmin M., fifth-year undergraduate, Indiana University East, Richmond
“I always call to see what and why I was being charged. Sitting back and doing nothing just means you’re losing money.”
—Emily H., fourth-year undergraduate, Metropolitan State University of Denver, Colorado
The point of a checking account is for you to be able to use your money—otherwise, you could have it earning interest in a savings account (or, even better, invested in a Roth IRA or 401k). Before you open a new checking account, think about how you’ll need to use it.
Here are a few specific questions you might want to ask:
- Are there any maintenance fees (typically annual or monthly) for opening the account?
- Is there a minimum balance or direct deposit requirement? What are the penalties if you violate those requirements?
- Will you be able to write checks, transfer money, or pay bills online? Are there limits on the number of transactions or fees to use these services?
- Where are the nearest in-network ATMs? Are there fees for withdrawals?
- Will the bank provide you with a debit card? Are there fees to use it?
- Does a “no-fee” account actually start charging you fees after a set period of time, such as after the first year?
It’s extremely important to understand the details of your account, even if you’re using a bank that has a partnership with your school. Some bank accounts only waive fees if you maintain a minimum balance or set up a recurring direct deposit from an employer. If this is the case with yours, make sure you have a way to keep that account balance/direct deposit in place to avoid charges. You could also find yourself paying unexpectedly high fees to withdraw cash from an ATM, transfer money, or pay bills from your account.
“Be sure to read the details of the account being opened. If anywhere you see fees, decide on whether it is something you know you can avoid. Keep the account details sheet for a reference when you question fees.”
—Annie D., second-year graduate student, University of Wisconsin, Oshkosh
If you’re having trouble understanding a banking agreement, get help. Ask a bank representative to walk you through the details, find out if your school offers free financial or legal counseling for students, talk to friends or family who have experience with banking, or do research online from a trustworthy source, such as the Consumer Financial Protection Bureau or Bankrate.com.
Check the “Get help or find out more” section at the bottom of this article for more suggestions.
Most financial institutions are for-profit businesses. Even if a bank has a partnership with your school, you are still a customer. If your bank isn’t generating revenue directly through fees, they may try to sell you related products or services when you open your account, or later when you use their website or mobile app.
Overdraft protection is a perfect example. Banks pitch this as a no-brainer add-on service, and it sounds helpful: If you need to withdraw cash or pay a bill and don’t have enough in your account, the bank will temporarily cover the difference. Otherwise, the transaction will be declined. Overdraft protection might save you some short-term embarrassment or provide convenience if you try to make a purchase and don’t have the funds available. However, the average overdraft fee is over $30 per transaction, according to a 2020 Bankrate study.
You decide to grab pizza with friends, and the place is cash only. You withdraw $20 from the closest ATM, forgetting that your account balance is low because you just paid your electric bill. You have overdraft protection, so the transaction goes through. Now, not only do you have no money left in your account, but you owe the bank an extra $30 for the overdraft protection fee. If you used an out-of-network ATM, add another $5 in fees.
“That $15 pizza just became a $50 pizza,” explains John Pelletier, director of the Center for Financial Literacy at Champlain College in Burlington, Vermont. “You can end up wasting a lot of money without realizing it.”
Pelletier recommends finding out whether your bank offers a free app you can use to check your balance or receive an alert when the balance drops below a certain level. You may also be able to look up in-network ATMs on your bank’s website. These tools and your overall awareness of your finances can help you avoid fees and eliminate the need for overdraft protection.
Remember: Everything is based on your budget
Everything we’ve covered here ties back to keeping track of your spending and sticking to a budget. The most common avoidable fees college students are likely to pay relate to a lack of awareness when it comes to their finances and spending, according to Dr. Yates. “These fees come in the form of overdraft fees and late fees. Careful attention to balances, obligations, and due dates can help students avoid these expenses.”
Theodore R. Daniels, founder and president, Society for Financial Education and Professional Development, Alexandria, Virginia.
John Pelletier, director, Center for Financial Literacy at Champlain College, Burlington, Vermont.
Stephanie Yates, endowed professor and director, Regions Institute for Financial Education, University of Alabama, Birmingham.
Bankrate. (2020, January 15). Minorities, millennials among those who pay the most bank fees. https://www.bankrate.com/pdfs/pr/20200115-best-banks-survey.pdf
Bankrate. (2020, November 21). 2020 checking account and ATM fee study. https://www.bankrate.com/banking/checking/checking-account-survey/
Bankrate. (2020, December 11). Checking vs. savings account: What’s the difference? https://www.bankrate.com/banking/checking-vs-savings-accounts/
doxoINSIGHTS. (2020, July). The hidden costs of bill pay. https://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/2020/07/13/doxoINSIGHTS%20Hidden%20Costs%20of%20Bill%20Pay%20Report.pdf
US Consumer Financial Protection Bureau. (n.d.). Checklist for opening a bank or credit union account. https://files.consumerfinance.gov/f/documents/cfpb_checklist_opening_bank_account_web.pdf
US Consumer Financial Protection Bureau. (n.d.). Consumer guide to being denied a checking account. https://files.consumerfinance.gov/f/documents/cfpb_adult-fin-ed_consumer-guide-to-being-denied-a-checking-account.pdf
Stein, G. (2017, January 19). US Consumer Financial Protection Bureau. Understanding the overdraft “opt-in” choice. https://www.consumerfinance.gov/about-us/blog/understanding-overdraft-opt-choice/
CampusWell survey, January 2021.