Students: One Tip That Will Save You Thousands
Let’s be real. Thinking about bank accounts while actively involved in school is something that very few college students do on a regular basis. So what happens is that most of them end up overdrawing their accounts – not just once, but many times.
Most students that are new to banking are not informed about how banks work, especially how a bank can charge fees (around $30, but this varies) each time they make a purchase without sufficient money in their accounts to cover it. If you walk to the local gas station and buy three items (Coke for $2, chips for $3 and gum for $2), and you only have $1.50 in your account, this shopping trip might end up costing you $97 and not the $7 you initially wanted to spend. The extra $90 is from three overdraft fees that the bank assessed before covering the $7 you charged.
The one rule that will save you thousands while you are attending college is this: Open a checking account that has no fees and no ability to overdraw the account. This last point is crucial. You want to have the guarantee that if there are no funds in your account, the bank will deny the transaction and not charge you any fees for doing so.
There are at least two such banks you can look into: ING Direct’s “Electric Orange” checking account and Schwab Checking. Both of these accounts have no monthly or usage fees and no overdraft fees. With the Schwab account, you’ll have to ask them to turn off the overdraft protection. These are just two examples, and there might be others out there worth looking into.
A friend recently confessed that almost every month he “had more month than money” and constantly overdrew his account. He showed me his bank statements from the last six months and we counted 17 overdraft fees. His bank charged $27 per overdraft, which meant he paid $459 to the bank in fees in the last six months. I recommended that he switch banks as soon as possible.
There are options available if you find yourself in this same situation, and paying for overdraft fees should no longer be tolerated. With the money you save, you can start an investment account or pay down any credit card debt you may be carrying.
Tuesday, July 29th, 2008 at 12:17 pm