College Debit Cards are a Huge Scam: Here is What to Watch Out For

As the fall semester begins, one of the first choices college freshmen have is picking their very own debit card. While this decision often symbolizes independence and adulthood, it can also be a minefield of hidden fees and service charges. Banks and financial firms are becoming more aggressive as they market their prepaid debit cards to students, while glossing over the drawbacks.

In reality, prepaid debit card deals benefit everyone except the cardholder. While banks profit from heavy overdraft fees (the median charge being $34 per transaction) which tend to affect people ages 18 to 25 the most, universities have found a new source of revenue from the banks themselves. Banks offer colleges financial incentives to gain the exclusive rights to their student ID-debit card. By proudly displaying the school's insignia on its cards, banks are now able to lure students by marketing themselves as a partner to the college. Thus, college campuses have become a feeding frenzy for companies who use the inherent trust between a student and his or her college to make money.

What's more alarming is how determined both the banks and the colleges are to keep this deal under wraps. After the Consumer Financial Protection Bureau sent a letter out to the ten largest universities in the country asking them to disclose their bank contracts, only the University of Iowa fully complied, revealing it's getting $1 million over a five year contract plus a $125,000 signing bonus from Hills Bank & Trust. Considering there are 900 colleges partnering with banks, it's shocking that none of the other largest universities feel their student body has a right to know about the revenue they are making from debit cards. 

Not surprisingly, these deals hurt lower income students the most. Students often use these prepaid debit cards to access their financial aid fund, but end up paying a $5 average surcharge every time they use a non-affiliated ATM. So under the guise of convenience, banks are now profiting from already struggling college students. Universities claim to be dedicated to serving the student body, but with furtive bank deals, exorbitant textbook prices and rising tuition, it is beginning to seem that colleges view their students as merely cash cows. So as you compare debit card choices, remember to read the fine print and know that a college endorsement does not always equate to the best option.

If we want to make college more affordable, these type of scams cannot stand. It is time for government involvement - to demand transparency and regulation in these deals. By registering to vote, you can be a part of the decision of who represents your best interests in the upcoming midterm elections.