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College Students Overdrafting: Less Money, ‘Mo Problems

College Students Overdrafting: Less Money, ‘Mo Problems
6/7/2016
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Susan Dutca-Lovell

College students may soon find themselves counting their pennies before deciding to go out on the weekend. What could be worse than being a broke college student? For starters, spending money that you don't have and sending your bank account into the negatives. Overdrafting is most common among Americans ages 18-25, and the average $34.50 penalty fee isn't any less harsh than the national median of $35. But who's to blame - students or colleges?

Universities and colleges have started partnerships with banks to offer on-campus banking services to students, but convenience doesn't mean leniency, and students aren't off the hook when it comes to overdraft fees. The average consumer pays two overdraft fees a year, meaning college students could owe more than $70 in fees. According to NerdWallet, if every college student from participating colleges averages two overdrafts a year, that's $828 million in fees. Why are college students most likely to fall into this snowballing, financial rut? NerdWallet Banking analyst Devan Goldstein claims that "at that age, most people have less money coming in and more pressure to spend money, from peer pressure in particular."

Do colleges and banks have the students' best interest in mind? Some financial experts aren't so sure, as the products they offer come with a "steep price." Banks see the value of partnering with colleges and offer "lucrative deals" that will increase marketing opportunities, especially with the lack of profits from retail bank accounts over the past several years. And of course, there's something in it for the schools - they can receive a large payment from banks - like the case at UC Berkeley, which will receive $17 million over the next ten years for signing with Bank of the West.

Parents and their kids should consider a few things before opening a bank account: overdraft fees, the limit to how many fees can be charged a day, and what happens when a student declines an opt-in for overdraft protection. Experts also advise students to search for better deals at local banks that offer lower fees - this could be a slight issue for campus-bound students who don't have transportation readily available.

So before you write that next ill-advised check your bank account won't cover, don't forget that overdrafting is optional, and there will be a price to pay.

In your opinion, should overdrafting fees be eliminated completely for college students? Or should they have to pay the price for financial irresponsibility? Leave us your comments below.

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