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Paying for College

The College Debit Card Trap

High fees can make branded cards a bad deal.

When students start school this fall, they should study the fine print before signing up for a debit card sponsored by the college or university. Some of these cards carry fees that are far higher than what you’d pay at a bank or credit union.

Some debit cards are used to disburse a student’s financial aid refund (the balance after bills for tuition, room and board, and fees are paid), and they’re typically less expensive. But when financial institutions pay schools for permission to market directly to students, fees spike. Students at these schools paid an average of 2.3 times more in fees than students at schools without such agreements, according to a 2019 study by the U.S. Public Interest Research Group, a consumer advocacy group. Banks often bombard students with promotions before they arrive on campus and promote cards at registration events.

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Students (and parents) interested in a campus-sponsored debit card should proceed with caution because there’s a good chance they’ll remain with that bank after they graduate, says Ken Tumin, founder of DepositAccounts.com. He recommends comparing the branded card with debit cards offered by credit unions and online banks. Look for a card that has no overdraft or ATM fees.

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