Before your students step foot on a college campus and visit those banking booths...
...they might want to ask the banker "Are you sharing my fees with the college so every time I overdraw my account...my college benefits?"
Here's the data showing the average costs by bank:
During the 2016-2017 academic year, students using college-endorsed debit or prepaid accounts paid $27,600,000 in account fees, according to the report. And students tended to pay more fees when financial institutions paid their colleges to promote the accounts. That could include creating products that feature co-branding between the company and the school, allowing the company to email students to market the product to them, permitting company representatives to set up a table during orientation and sharing revenue with the companies when students sign up.
Doesn't this create a bit of a perverse incentive? The better the financial education on campus (just say "no" to overdraft protection, comparison shop checking accounts), the less fee revenue will flow to the colleges. For those wondering how long this game can go on, I believe help is on the way with the proliferation of fintech start-ups who recognize this "beginner's tax" called overdraft fees are a cash cow that customers hate and banks won't give up. The big 4 (WF, BofA, Chase and Citi) should be worried by the growth of these new banks that advertise like this:
No hidden fees. Ever.
No overdraft. No minimum balance. No monthly service fees. No foreign transaction fees. No transfer fees. Over 38,000 fee-free MoneyPass® and Visa Plus Alliance ATMs, plus 30,000+ cash-back locations.
For a fascinating read on how a corporate culture can lead employees to commit fraud, check out this Bethany McLean article from Vanity Fair which describes the cross-selling culture at Wells Fargo
Give your students practice managing an online bank account (and avoiding overdraft fees) with our Short Form Bank Simulation.
About the Author
Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.
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