Overdraft U: Warning to College Students Opening Their First Checking Account

Jul 10, 2015
Research, Checking Accounts, Current Events

March 2015 report from Center for Responsible Lending highlights the dangers of overdraft checking account fees for college students:

Major Findings

  • 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!

About the Author

Tim Ranzetta

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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