Truth And Consequences Of Debit And Credit Cards At College

CreditCards_AWhile college students are using credit cards less, debit card use is on the rise—77 percent of college students carry and use debit cards, according to a recent survey. Some students and families are finding prepaid credit and debit cards another convenient way to manage money and credit; all of these cards have “fine print” agreements that should be reviewed carefully.

The New York Higher Education Services Corporation (HESC), the state’s student financial aid agency, urges students to understand the cards’ terms agreement, and their rights and responsibilities.

Campus Debit Cards

Nearly every college provides students with a campus card that includes “flex dollars” that can be used for a wide range of services including meals, vending and photocopying services; the cards often function as a room key, library and ID card, too. If you are expecting a credit disbursement on your financial aid or work-study payments, they may be offered to you on your campus card, which can then be used as a debit card.

You are not required to receive financial aid disbursements or paychecks on a campus debit card and may choose to have the funds directly deposited into a personal bank account or provided on a paper check. And, though you may have access to the funds immediately on a campus card, you may be subject to early-access fees.

Here’s what you should know before using a campus debit card:

• Where on campus can you find free and unrestricted ATM access? Beware of cards that have only one or two ATM locations in busy campus centers or in offices with limited hours. You may face long lines during peak access times:
• Ask if there are any minimum or maximum cash withdrawal amounts when using the card at an ATM.
• Ask if the card has the same protections against theft, loss or fraud as traditional bank or
credit cards.

What About Credit Cards?

CreditCards_BCredit card use among college students has dropped significantly since the enactment of the CARD act in 2009, which put more restrictions on issuing credit cards to young adults. To open a credit card account, consumers under 21 must show an ability to pay off the debt or have a cosigner on the card.

While fewer college students are using credit cards and carrying a balance, it bears repeating a few caveats for those who want to apply for a credit card:

• Shop around before getting a credit card and avoid on-the-spot temptations such as a shopping discount or gift for completing an application.
• Look for cards offering a low interest rate under 15 percent with no annual fees.
• Avoid cards with low “teaser rates” that jump after 90 days.
• Pay balances in full each month to avoid finance charges. If you must run a balance, make the largest payment possible each month.
• Make your payment early—at least seven to ten days before the due date to be sure it will be credited to your account on time. Also, keep a close eye on the due date. Some companies have been known to change the due date without notice, which may result in a late payment fee.
• If you miss a payment, your interest rate may increase; ask about late fees and interest rate penalties before you sign.
• If you have difficulty making payments, get help. Call the credit card issuer and explain your situation; you may be able to negotiate a reduced payment for a period of time to help avoid default.
• Need further assistance? Visit the New York State Department of Financial Services website to find a list of reputable credit counseling and budget planning services that you may consult for more intensive credit issues.

Fees—Read the “Fine Print”

Debit or credit, your card will have an agreement that should be reviewed carefully before you apply for it. Understand when fees may be levied—here are a few of the most common:

• Activation fees may apply for first-time use, and may be as high as $15.
• Prepaid debit or credit cards may have a reloading fee.
• Using mobile banking options? There may be a convenience fee for each deposited check.
• Low-balance and non-use fees may also be included in the agreement.
• ATM fees apply to most cards unless you are in the same financial network as the card issuer. Some ATM fees may be as high as $5 per transaction.
• If you have to contact the card issuer’s customer service, there may be fee, particularly on prepaid cards.
• Overdraft fees may be as high as $30; overdraft protection services may also incur a monthly fee.
• Ask about any fees that may be levied for connecting your campus or prepaid card to a recurring charge such as a NetFlix account or gym membership.

Debit and credit cards are a convenient and fast way to access your money and make purchases…make those cards work for you—not the other way around.

—Kathy Crowder is the senior vice president of communications at HESC

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