Anything feels intimidating if you haven’t done it before – or even if you haven’t done it for a long time. That includes opening an account at a bank or credit union. If you (or someone you know) are one of over 7 million U.S. households who don’t have a bank account, you might wonder “why bother?”
There are several major benefits to having a bank or credit union account. Your money is safe there, and there is great convenience in being able to receive payments (paychecks, tax refunds, and more) electronically. When it comes to making purchases and paying bills, a bank account is convenient and also saves money, compared with using pre-paid cards or money orders. Banking also contributes to your credit score, and can make it easy to provide proof of payment.
When you’re ready to explore the possibility of opening a bank account, the FDIC (Federal Deposit Insurance Corporation) has a new website designed to help you learn more and move forward. If you’d like to learn more about Credit Unions, mycreditunion.gov has great resources too.
Mobile banking continues to grow in popularity. The new apps, however, aren’t without risks of errors.
When making payments via transfer be sure to double check the payment and confirm you are using the correct person or business receiving the payment, before hitting send. You can issue a stop payment for a check, dispute credit card payments, or cancel an auto bill payment, but a transfer is permanent and cannot be reversed. If it is the first time you have sent money to someone, ask that they send a request for payment or send them a small test payment to confirm it is the right person.
Money transfers are immediately removed from your account, but the receiver usually has a waiting period before the transferred funds can be spent or withdrawn.
If the transaction will be used on a tax return, you may want to use an alternative method. The IRS does not consider a transaction valid without printed proof. Apps are revised and updated. The software developer is not obligated to provide you with permanent access to previous transactions.
Fraudulent apps closely resemble the legitimate ones. Names and logos can easily be copied and used to build very close look a-likes. Verify the source of the app by visiting the company through another URL, before downloading and entering personal information or account details.
It’s not surprising to read that college students tend to have more bank overdrafts than the average consumer. After all, they’re often managing money on their own for the first time. Add to that the fact that they have limited resources, and that in many cases they receive their funds in one sum at the beginning of a semester, and then have to carefully stretch that money throughout several months. It takes a while to learn the skills required to manage effectively and avoid overdrafts.
A recent report from the Consumer Financial Protection Bureau identifies another risk to students: if their school spirit leads them to sign up for a debit card branded with the school logo or mascot, the fees they incur for each overdraft may be higher than average. That’s right: just because the card is branded by your school does not mean it’s the best card for you. Colleges do not always ensure competitive fee structures in the products included in their marketing agreements.
The risk for students is real: for students with limited resources, extra fees of even $100 – $200 can impact school success. Students running short on money may skip purchasing key books, may work more hours and sacrifice study, or may simply become discouraged and quit. Fortunately there is also good news – this report suggests clear strategies for minimizing the risk:
- Comparison shop when choosing banking services, just as when buying shoes or refrigerators. Brand is not the only factor to consider.
- Provide guidance and support to college students to help them learn critical financial management skills and avoid costly lessons. Parents and other concerned adults can alert students to the need and monitor their financial well-being, with a goal of catching problems early. Students themselves, if made aware of the issue, can increase their financial vigilance.
This article from FINRA provides more information.