College Students Face up to $710 a Year in Overdraft Fees
College students are particularly vulnerable to excessive overdraft fees from bank debit cards, according to the latest research from the Center for Responsible Lending. The study showed that nearly four out of ten college students (39%) between the ages of 18 and 25 will incur at least $67 in overdraft fees annually, with 11% of the students being subject to fees of $710.
For their research, the center specifically focused on co-branded debit cards that schools offer so students can collect leftover financial aid each semester. The cards are provided in lieu of a check, and they often double as a student ID. Approximately 70-80% of students choose to use these cards instead of receiving their money by check, but in doing so, they put themselves at risk of paying the high overdraft fees associated with the cards.
College-aged cardholders are more at-risk of overdrafting their accounts than those over the age of 25 because they are not as experienced with managing their finances and working with a bank account.
The research found that 15% of the students had two overdrafts per year totaling an average of $67. Another 13% had an average of seven overdrafts, costing $264. And incredibly, more than one in ten students (11%) under the age of 25 incurred overdraft fees of $710 on 19 overdrafts per year.
Each bank has its own specific terms about overdraft fees, and some are more expensive than others. Most banks set a cap to the number of fees charged per day, but there are some that charge for an unlimited number of transactions. Some banks also charge a fee if the student’s account is overdrafted more than a few days. Midfirst charges $25 for accounts overdrawn longer than seven days, and U.S. Bank charges $25 per week every week the account is overdrawn.
Student ID debit cards may be convenient to use, but these fees could be disastrous for college students already facing student loan debt. If you or someone you know uses one of these cards to pay for school and living expenses, be aware of the high fees you’ll pay if you overdraft. It could end up costing you hundreds of dollars a year.