The boxes and bags are all packed, the dorm room has been
assigned and course selection is right around the corner. Starting college is a heady time, one that
can cause the new college student to forget some of the more practical matters
associated with the transition, such as the distance from the Bank of Mom and
Dad, and the all the other annoyances associated with the first tentative steps
into financial independence.
You may already have an account open from a summer job or
weekends bagging groceries, but does that mean that you should continue using
this account when you head off to college? Not necessarily, especially for
those of you whose colleges are in a new state or were previously banking at a
more local institution. Read through the following tips to get a better sense
of what you’ll want to look for when deciding how to handle your banking while
in college.
Two Choices
The first thing you need to decide is: credit union or bank?
If you’ve never opened an account at either, the distinction between the two
might not be immediately apparent. Both types of institutions accept deposits
and provide financial services to their depositors, such as providing loans and
allowing members access to their money through ATMs worldwide. Credit unions,
however, are not-for-profit institutions that view themselves as community
oriented, generally offering more advantageous rates, from lower interest rates
on loans to higher interest on savings account or CD rates.
Technically speaking, whereas depositors at banks are viewed as customers,
credit union depositors are members and owners in the union. Money at banks is
invested for the banks profit; money at a credit union is reinvested for your profit.
Convenience
As a college student, your life will be busier than ever
before. Heading off campus with no car might be a daunting challenge, and
access to your money will be of paramount importance. Credit unions and banks
often have branches on your campus; you might even see one of your classmates
behind the counter handling your deposit. They also usually operate at least
one or two ATMs on campus as well, which means a much shorter walk to access
cash.
With the explosion in smartphone use, especially amongst the
college-age demographic, online banking and mobile apps have become incredibly
important. A few years ago, this was an arena dominated by larger banks with
the financial resources to offer the most high-tech tools for mobile banking.
In the past few years, however, credit unions have caught up and now offer
Fees
Watch out for minimum deposits and other requirements at
large banks; many require that your checking account and your savings account
both maintain a minimum balance. If your balance falls below this amount, you
may be charged. That’s right, you can be charged for having too little money. One
option is to look for a student account, which might waive such fees for
full-time college students. Most credit unions also avoid these fees in
principle and in practice, as their goal is to make you money.
As a broke college student, you may often find yourself
scraping the bottom of your account for a life-saving slice of pizza. Don’t let
a $3 slice turn into a $28 slice – make sure to take into account the overdraft
fees at a bank or credit union and understand how to avoid them.
Perks
Banks and credit unions near college campuses know the way
to their members’ hearts – free t-shirts and other such perks. It doesn’t end
at graduation either. If you join a university credit union, most allow for
alumni membership, which means you can continue to be a lifetime member. Your
credit union will probably offer auto and home loans, as well as other types of
credit at very good rates; remember that even a small difference can save you a
bundle over the life of the loan.
Final Balance
This article has come down pretty heavily on the side of
credit unions. Rest assured that as not-for-profit institutions, there is a
good reason for it. In the interest of completeness, however, I should mention
some last things to consider before telling you to run down and open up your
new credit union account.
Big banks offer two advantages that credit unions may not. The first is easy transfers from mom and dad. Having an account at the same bank as them may make it easier to transfer funds when your books cost a little more than you originally budgeted for. The second is credit cards, something that should probably be avoided by freshman and sophomores anyway, but a useful financial tool that your credit union may not offer.
Big banks offer two advantages that credit unions may not. The first is easy transfers from mom and dad. Having an account at the same bank as them may make it easier to transfer funds when your books cost a little more than you originally budgeted for. The second is credit cards, something that should probably be avoided by freshman and sophomores anyway, but a useful financial tool that your credit union may not offer.
That being said, make sure to shop around and check out your university’s credit union when you first get to campus. Let them explain the rates and benefits to you and see if you’re convinced. Happy saving!
John Gower is a writer
for NerdWallet, a personal finance website dedicated to helping consumers find
the checking accounts, credit cards and more.
