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How to Avoid Hidden Banking Fees in College

Updated: Jan 5

Report Finds High Fees Charged on Student Banking Products Endorsed by Colleges

Updated Post: 7/21/23

Original Post: 11/3/22

Banks and credit unions exist to serve us, not the other way around. Every great consumer is skeptical. You can love your bank or credit union and still be skeptical each time a new service rolls out or you have something new to sign; deciding where to bank while in college isn’t any different.

Why comparing basic banking fees can be complicated

Current or future college students begin their school years plowing through a stack of fine-print paperwork. They are scrambling between choosing classes, buying the right textbook, figuring out their food plans, and deciphering their financial award letters. The details for on-campus student banking options are deep in that pile of minutia.

Decision inertia is the tendency to repeat previous choices independently of the outcome, which can give rise to perseveration in suboptimal decisions. Choices such as repeatedly signing whatever offers or paperwork is in front of you as you work through the paperwork process of going to college or sticking with your current bank or credit union without considering how your new location can impact your current services and fees.

Research shows that “decision inertia plays a role in human decision-making under risk and investigates the underlying processes. We find a significant tendency to repeat previous choices in decision-making with monetary feedback.”

What’s the lesson? Be a skeptic, and pay attention to these details. Stop, think, and compare services and fees before deciding where to bank in college. Mistakes are expensive.

Avoid high cost of banking fees

“Many college students trust that schools have their best interests in mind. While colleges have the substantial bargaining power to obtain superior terms and pricing for their students, we find that many college-sponsored financial products cost students more than accounts that are readily available on the open market.” said CFPB Director Rohit Chopra.

Here are the lowlights of what the CFPB found reported in the College Banking and Credit Card Agreements: Annual Report to Congress in October of 2022:

Financial services providers and their partner schools appear to offer and promote more costly products to students than are otherwise available in the market and by the same financial provider. Some providers’ agreements with schools allow them to charge students five overdraft or NSF penalties per day, costing $175.

One entity dominates the market for financial aid disbursements, providing nearly 70% of the accounts offered in partnership with schools—and imposes surprise monthly fees, including monthly service fees charged on accounts with less than $300 in qualifying monthly deposits. Although financial aid disbursements may comprise the bulk of a student’s deposits, they do not count as qualifying deposits.

How to Avoid Hidden Banking Fees in College

How to Avoid Hidden Banking Fees in College

According to the CFPB, “Schools are required to post on their websites the agreements they have with financial services providers, any compensation exchanged between them, and the average costs paid by students. These disclosures help make the terms of the college-bank relationship transparent, but the CFPB’s review found that hundreds of schools did not appear to have posted the disclosures in the public and conspicuous manner required.”

Beware of student banking relationships at your college

Only some banks or credit unions that have partnered with colleges and universities are charging unnecessary fees or limiting the transparency of their agreements. As you review the chart below, notice that the average annual costs incurred by account holders are low for some and very low for others.

How to choose the right student banking account for you

Many students have banking relationships while in high school, often linked to the account of a parent or guardian. It is not uncommon for financial institutions to offer student banking services through college and waive some ATM fees.

The CFPB checklist for opening a bank or credit union account is particularly helpful when deciding where to bank in college. The items guide you through what fees and services you should evaluate, allowing you to quickly make an informed decision.

The CFPB Student Banking: Getting started page is helpful for those who want to dive deeper and learn more.

How to Avoid Hidden Banking Fees in College


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Front. Psychol., 16 February 2016, Sec. Decision Neuroscience,

Consumer Financial Protection Bureau . (2022, October). College Banking and Credit Card Agreements: Annual Report to Congress. Retrieved November 3, 2022, from

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