5 On Your Side

Credit cards for college students can carry costly fees

Posted November 6, 2014
Updated November 10, 2014

For most college students, class schedules and social events are top of mind - not credit cards and potential fees and penalties.

But that's what a lot of students are running into with their new credit and debit cards.

Higher One is one of the biggest players, offering debit cards at more than 800 campuses across the country.

"We've seen high and unusual fees, the kinds of fees you wouldn't typically see on a regular retail bank account,” said Suzanne Martindale with Consumers Union, the policy and action division of Consumer Reports.

Consumers Union looked at Higher One and eight other companies that offer campus-sponsored accounts with cards that often come with a college logo.

Overdraft fees as high as $38 dollars, a 50 cent fee each time the debit card is used, out-of-network ATM charges that can run as high as $3 and even an inactivity fee were among the findings.

Consumers Union found some accounts have low-cost options, but students need to be careful, or risk hundreds of dollars a year in usage fees.

So why even sign up for one?

"Many students find it difficult to avoid signing up for these products,” Martindale said. “It may be the default option to manage their financial-aid money, and they're being nickel-and-dimed out of that aid."

In fact, a class-action lawsuit against Higher One alleges "aggressive and deceptive" marketing and a failure to disclose "unconscionable" fees. Higher One settled for $15 million. There was no admission of wrongdoing, but Higher One agreed to drop some of the fees.

Students don't need a campus-sponsored account to get their financial aid. By federal law, it can be directly deposited to an existing account or disbursed as a check or even cash.

Consumers Union is pushing for regulators to do something about campus banking arrangements that restrict choices and charge unfair fees.


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  • fuzzmom Nov 10, 2014

    The only good thing about this is that the new consumer protection law does not allow students to get credit cards until they are 21 (unless they are with someone else on their account or have a co-signer). It could be even worse if it was still 18. Dodge Polara, some of them get them for a very good reason, to start credit. "If" it's used wisely, a credit history that begins early, can be a dynamic tool for credit power later on. In addition, some of them are using it to fill in the gaps missing from financial aid and/or family support. Of course there are those who will be unwise with them, but that's at any age. It is unfortunate that it appears those lenders are targeting the most uninformed with predatory practices. Blame should also be placed on the colleges for allowing them on campus with their logos, and for not requiring even a 1 hour course on fiscal responsibility.

  • 68_dodge_polara Nov 7, 2014

    Why does a student NEED a credit card?

  • busyb97 Nov 7, 2014

    It certainly becomes a very hard and very expensive lesson.