By Judy McNary
Before your student leaves for college, decide how you want to handle day-to-day finances.
There was a time when cash was common but things have changed. Let’s take a look at options your student has for handling money.
DEBIT CARD — Your student should have one, linked to her own checking and savings accounts. You can choose to have those accounts linked in turn to yours. Linking accounts means transfers are fast and free. You can see your student’s spending (not always a plus!).
The debit card will be used often, so review the bank’s overdraft policies. Generally there are three options with debit cards. Your bank can charge a standard overdraft fee of anywhere from $20-35 each time the account is overdrawn. It can offer an overdraft protection plan that charges a fee to transfer funds from savings to cover the charge. (This fee may be less than the standard overdraft fee.)
Lastly, the bank can decline charges to the debit card when there isn’t enough in the account to cover. Bank fees are easily avoided, so make sure your student knows she needs to pay for these.
CAMPUS CASH CARDS are a convenient option at many schools. These allow students to create a cash account tied to the student’s ID card. Parents can add cash to the card when paying the tuition bill or go online to add cash throughout the semester. Your student can use it as a debit card for on-campus spending such as at the student union, on-campus restaurants, the laundry, or the computing center. In many locations the card can be used at ATMs or off-campus as well.
CREDIT CARDS are another option for handling money. In general, I recommend against students getting their own credit cards when they start college. With so many opportunities for misuse, it works best to wait a term or two before adding a credit card to the mix.
There are exceptions: a card can be great to have for emergencies or if your student will be traveling. In these instances, help her get one with low or no fees. If she will be studying abroad make sure the card has no foreign transaction fees.
PREPAID CREDIT CARDS provide another option for handling money. If your student can’t have a bank account, consider a prepaid card. For a fee, you can purchase a card and load it with cash. It then acts like a debit card — as your student uses it for purchases, the card balance is drawn down. When no cash is left on the card, purchases will be declined until the card is reloaded.
These cards do have fees and they do not help build credit. On the other hand, these registered cards offer theft/loss protections that are similar to credit cards and, like bank accounts, provide FDIC insurance.
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