With millions of young adults heading off to college this month, federal regulators are reminding those consumers to do their homework. Okay, not that homework, but the kind related to researching college-sponsored bank accounts.
The Consumer Financial Protection Bureau this week reminded college-bound students that just because their school is sponsoring a certain bank account, that doesn’t mean it’s the best option.
While many colleges may also negotiate with companies through million-dollar contracts to offer products that have lower fees or better terms than what students could get if they asked for the same deal on their own, a report last year from the Government Accountability Office revealed that many college-sponsored accounts were no better than what students could find themselves after shopping around, and in fact, were sometimes worse.
To ensure that students are getting the best deal possible, the CFPB launched the Safe Student Account Scorecard earlier this year and called on companies to publish their agreements with colleges.
The agency also suggests students keep a few things in mind when looking to set up a bank account while at college:
1. Just because an offer looks like official mail from your college, you don’t have to accept it.
Some colleges take steps to promote products through official email and mailings, and sometimes are compensated by banks for their efforts.
“For example, a college might use its official email communications with incoming freshmen to promote a sponsored account by encouraging students to use the ‘hot new’ campus ID from its bank partner,” the blog post warns.
Schools may also choose to provide printed materials at orientation or other official communications to highlight a banking partner.
2. Some staff on campus may work for your college’s banking partner.
“It’s always okay to ask questions when you’re deciding whether to open an account,” the post states. “Officials at your college can help you understand product terms and features in order to make an informed choice, but you should also ask questions about who you’re talking to.”
3. Your college may get paid when you open an account.
Some companies may pay colleges a fixed amount for each student that opens and uses the college-sponsored account, the CFPB reports.
“You should ask questions about how your college gets paid and keep in mind that if you feel rushed or pressured into opening a college-sponsored account, it might be because your college wants to sign you up to maximize its revenue under the deal,” the post explains.
Additionally, the Bureau warns students to be on the lookout for high fees associated with any financial account.
“Ultimately, the account you select can support your saving goals and help you avoid fees,” the post states. “Many banks offer programs to help you manage your spending and saving. Taking advantage of free account alerts through email or text message can help you avoid overspending, as can simply keeping track of your purchases and withdrawals and monitoring your account balance regularly.”
by Ashlee Kieler via Consumerist
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