Best Student Bank Accounts – December 2019

What Is a Student Bank Account?

A student bank account is a checking or savings account that a bank, credit union or other financial institution offers to students. Student accounts may have reduced fees and special features designed to meet students' financial needs.

A checking or savings account can be a safe and convenient place to deposit money, including financial aid, that you don't intend to spend right away. With a savings account, you can earn interest on your deposits. With a checking account, you can write checks, use a debit card to make purchases and use ATMs to deposit or withdraw cash or deposit checks.

Most checking and savings accounts offer online banking and a mobile app. These features let you use an internet-enabled computer, laptop or mobile device to check your account balances, deposit checks remotely, make payments and send money to other people.

If you have a checking account and a savings account, you can link the two accounts through your bank and transfer funds electronically from one account to the other.

Some banks have affiliate relationships with colleges, universities and other schools. These relationships allow those banks special access to market their student accounts and other financial products to the school's students.

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What to Look for In a Student Checking Account

The Consumer Financial Protection Bureau advises students to choose a bank account as soon as possible and preferably before starting school.

"Once you have a bank account, sign up for direct deposit with your school before classes start," the CFPB suggests. "If you're expecting money from your financial aid office, you'll often get it faster this way. It can be weeks before the school gets to writing you a paper check."

To choose a bank account, think about which features you need and compare at least a few accounts from different banks both on and off campus.

Student checking account features to shop for include:

You don't necessarily need to limit your options to banks and credit unions that have ATMs on or near your campus. That's because many banks and credit unions are part of ATM networks or will reimburse some or all of the fees that you might be charged to use other banks' ATMs.

It's smart to shop for a checking account with low or no overdraft protection fees, but keep in mind that you can also avoid these fees entirely by not signing up for overdraft protection.

A good bank account for students shouldn't charge fees and should be with a local bank or credit union that understands what local students want, says Adam Marlowe, principal experience officer at Georgia's Own Credit Union in Atlanta. He adds that some schools offer discounts, tickets, cheaper books or other perks to students who use a card from an affiliated bank on campus.

The CFPB says very few accounts charge no fees of any kind, so you should dig deeper into the fine print if a student account is marketed as "free" or "easy." Some banks will waive fees for students, so an account that normally charges fees could be free for you as long as you're in school. Once you graduate, the fees will kick in, however.

Reading the fine print for a bank account might seem like additional homework that you don't want to do. Still, it's smart to read the disclosure statements that will come with your new account. These legal documents explain how your account works, what the rules are and what fees you might be charged.

"Disclosure statements contain the critical information you need to make an informed decision about which financial institution and its products and services are right for you," says MyCreditUnion.gov, a website operated by the National Credit Union Administration.

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How to Open a Student Bank Account

You can open a student bank account in person at a branch, over the phone or online.

To open an account, you'll need to provide your name, birthdate, address and an identification number, which could be your Social Security number, Individual Taxpayer Identification Number, passport number and country of issuance, alien identification card number or other government-issued identification number. The bank uses this information to verify who you are and where you live.

Depending on your bank's requirements, you might have to show a government-issued photo ID, such as a driver's license, U.S. passport or U.S. military identification. Some banks and credit unions will accept a foreign passport or consular ID as identification.

One more thing you'll need is an initial deposit, as you'll normally be required to put some money into your account when you open it. The required minimum might be $25 or some other amount. If you open an account in person, you may be allowed to use cash, check, debit card or credit card for your initial deposit. If you open an account online or on the phone, your options might be limited to debit or credit cards.

If you're not yet 18 years old, you'll need a parent or other adult to open an account with you.

When you open a checking account, you'll have a choice to opt in or opt out of overdraft coverage. If you opt in and you withdraw or spend more money than you have in your account, your bank will cover the shortage. You will have to repay that amount, plus an overdraft fee. If you opt out, your bank won't process any transaction for more than what's in your account.

Overdraft coverage ensures that your checks and other payments will be processed, but overdrafts can result in hefty fees – typically $30 or more for each instance. A better strategy is to keep track of your account balance and your monthly bills and not spend money you don't have.

After you open your account, you should decide how you will keep track of your balance.

One way is to monitor your monthly statements. Some banks offer e-statements, which you'll receive electronically as an alternative to paper statements, which you'll receive in the mail. Some banks charge a monthly fee for paper statements.

Another way to monitor your balance is to set up an automated alert that will send you an email or text message if your balance drops to a certain amount that you specify. If your bank offers this feature, you normally can set it up online or with the bank's mobile app.

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Do You Need to Choose a Bank With Student Accounts?

The answer is no. But a bank that offers student accounts might be a good choice because these accounts are designed for students and may have lower fees that could save you money. But if you find a bank account you like that isn't a student account, there's no reason you can't choose that account if you meet that bank's requirements to open it. There are nonstudent bank accounts that offer plenty of features and low fees and are just as attractive in many ways as student accounts.

When you shop for a bank account, finding one with the features you want, locations that are convenient and low or no fees should be more important than finding an account that's specifically marketed to students.

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Should You Choose a Bank Affiliated With Your College?

You should never be required to use a specific bank just because it's affiliated with your school. "Just because a bank, credit union or other account provider pays your college for the right to market an account with your college's mascot, logo or name, it doesn't always mean that it's the best deal for you," the CFPB says.

If you plan to do a lot of banking in person, an affiliated bank might be more convenient for you than a bank that doesn't have a strong presence on or near your campus. But if you're more likely to use online banking or your bank's mobile app most of the time, branch locations might not be as important to you as other account features or bank services.

Fees should be a consideration as well. An unpublished CFPB analysis from 2018 found that at most colleges, a majority of students didn't pay any fees for an account with an affiliated bank. But for those students who paid affiliated-bank fees, the amounts added up.

"The bureau reviewed 573 colleges across the country with marketing agreements with banks. It found that 1.3 million students attending these colleges had open and active accounts with their colleges' account providers. Students using accounts at these schools paid more than $27 million in fees during the 2016-2017 academic year, including overdraft and penalty charges," CNBC reported.

The analysis found one large national bank charged students an average of almost $47 per year in fees.

Marlowe says using an affiliated bank or credit union "shows off support for the university," but caution and research are paramount.

"Oftentimes (students) trade other features and options from a traditional account because of the affinity. It ultimately comes down to what works best for the individual," he says.

The bottom line is that your decision to use or not use an affiliated bank might come down to what's more important to you: showing your school spirit or finding the best bank for your needs.

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Benefits of a Bank Account for a High School Student

Student bank accounts aren't only for college students. In fact, high schoolers can also open student accounts jointly with a parent. Accounts for these younger students are sometimes called teen accounts or youth accounts.

"High school students are highly encouraged to seek an account that is joint with a parent so they can begin to learn the process of managing money. This will be super helpful as they enter their college years and no longer have the daily support from their parents," says Marlowe.

A youth or teen checking or savings account can be part of a young person's financial literacy training, says Military Onesource, a government-run resource for military families.

The website offers these tips for parents to teach their teenagers about money:

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Should Students Choose a Bank or Credit Union?

A bank is a for-profit financial company that offers deposit accounts, credit cards, auto loans, home mortgages and other financial products and services. Banks don't have membership criteria and don't charge membership fees. Banks tend to have more branches, more ATMs and online banking and mobile banking apps with more features.

A credit union is a nonprofit cooperative that's owned by its members and offers many of the same types of accounts and loans as banks. Credit unions typically have membership criteria. You might have to live in a certain community, work for a specific employer, belong to a certain religious organization, homeowners association, labor union or other group or have a close family member who meets the criteria. Many colleges have a campus credit union that any enrolled student, employee or alumnus can join.

Credit unions generally pay higher interest rates for checking, savings and other deposit accounts, charge lower fees and have lower rates for auto loans, home mortgages and other consumer loans.

Most banks and credit unions offer free deposit insurance for their customers' accounts. Bank accounts are normally insured by the Federal Deposit Insurance Corp. Credit union accounts are usually insured by NCUA.

Credit unions are known for personal service and high customer satisfaction. That might be an important benefit for students who are new to banking and need some hand-holding to open and manage their accounts.

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Traditional Bank vs. Online Bank for Students

Students can find good checking and savings accounts at both traditional banks and online-only banks.

You can have accounts at more than one bank, such as a checking account at a traditional bank and a savings account at an online one. If you need to transfer funds between accounts at different banks, the process to link them will be a bit more complicated than it would be if the accounts were at the same bank.

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Student Banking Glossary

ACH. Automated clearing house, an electronic network for fund transfers such as bill payments and payroll direct deposit.

APY. Annual percentage yield, the effective annual rate of return taking into account the effect of compounding interest.

Check clearing. The process of the funds in a check becoming available for the payee to use. When the funds are fully available, the check is said to have "cleared."

Checking account. A deposit account that allows withdrawals by writing a check or with a debit card.

Credit union. A nonprofit and tax-exempt savings and lending cooperative organization that's owned by its members, who vote for the board of directors that oversees management.

Custodial account. A savings account that's controlled by an adult for a minor. State laws usually define a minor as anyone who is younger than 18, but laws vary from state to state.

Direct deposit. A transfer of funds directly to a recipient's deposit account without the need to deposit a paper check and wait for it to clear.

Deposit insurance. A financial product that protects depositors from losses if a bank or credit union where they have deposited money fails. Most deposit insurance is provided by the federal government or a state government agency.

Federal Deposit Insurance Corp. A federal government agency that insures deposits at FDIC-insured banks.

National Credit Union Administration. A federal government agency that regulates federally chartered credit unions and insures their deposits.

Online-only bank. A bank that offers services and customer support only online, with no branches.

Overdraft. A transaction in which a bank allows a customer to withdraw more money than is in an account. The bank covers the shortfall, which the customer must repay, usually with a fee.

Savings account. A deposit account at a bank or other financial institution. Savings accounts may limit the number of withdrawals per month, charge fees and pay interest on the account balance. Savings accounts typically don't include check-writing.

Student bank account. A checking account that's marketed to college students.

Youth bank account. A checking account that's intended for teenagers.

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