Financial literacy begins with managing a bank account. Many banks offer accounts that cater specifically to students with lower (or no) fees, lower minimum balance requirements and easy access to internet or mobile banking. But is a student checking account the right choice for every teenager? Explore the pros and cons of student checking accounts to find out.
What is a student checking account?
Student checking accounts are intended to help high schoolers or college students hold and manage money. Banks and credit unions may offer accounts catering to different age groups such as 13 to 17 (for students in high school) or 17 to 24 (for students in college). Typically, applicants must provide a student ID or other proof of student status as part of their application.
The advantages of student checking accounts
While college students are typically eligible for traditional checking accounts, student accounts may offer some benefits that make them worthwhile.
- Lower fees: Most traditional checking accounts charge a monthly maintenance fee if the account holder does not maintain the required account balance. Student account providers may charge lower-than-average fees or waive them altogether.
- Low or no minimum balance: Student account holders may not need to maintain a specific account balance to avoid monthly fees.
- Online banking: Students can track their expenses, save money with automatic savings features, make fast payments with peer-to-peer payment systems and even deposit checks online.
- No minimum deposit: Students may not need a minimum deposit to open their account. They may be permitted to open their student checking account with $0.
- Liability protection: Many banks offer to reimburse unauthorized debit card transactions if fraud is reported within a specific period.
- Rewards and perks: Banks may attract new users through exciting rewards programs when they meet requirements. For instance, a bank may offer cash rewards to account holders who complete a certain number of eligible transactions within a certain timeframe.
- Financial literacy: Having a checking account alone helps students learn the ropes of money management firsthand. Additionally, banks often provide tools and educational resources designed to support students on their journey to becoming financially savvy.
The disadvantages of student checking accounts
Though student checking accounts offer many benefits compared to traditional checking accounts, they also have some drawbacks worth considering.
- Limited eligibility: Student checking accounts are only available to individuals who can prove student status and belong to a certain age group. When you’re no longer a student, the bank will convert your account to a traditional checking account.
- May need a co-signer/co-owner: Some banks may require applicants under 18 to name an adult as their co-signer or co-owner. These requirements may vary depending on the student’s age and account type.
- Fewer features: Banks may offer lower interest rates on student checking accounts. Some student accounts may limit the number of transactions or withdrawals you can make each month without incurring fees.
- No credit-building benefits: Unlike credit cards, student checking accounts don’t help build credit history.
- Potential credit damage: Checking accounts don’t usually affect your credit score, but if fees from overdrafts and bounced checks add up and go unpaid for a while, the bank may send the account to collections. This can seriously hurt the account holder’s credit score.
- Encourages needless spending: Easy access to funds through debit cards and mobile banking may facilitate impulsive spending, especially for students who are still learning financial discipline.
Is a student checking account right for me?
A student checking account offers great benefits compared to a traditional checking account. Lower fees make it possible for students to reduce banking expenses while mobile banking, debit cards and payment apps make day-to-day transactions easy and effortless.
As with any financial product, understanding the terms and conditions helps you avoid unnecessary fees and charges so you can use your account responsibly. While risks exist, they’re the same as with a traditional checking account. Most eligible students can benefit from opening a student checking account and taking advantage of the favorable fee structure and potential rewards. It’s important to note that account features may vary from one bank to the next. Compare different accounts, their fees and benefits before choosing the best fit.
Disclaimer: Article content is intended for information only. It may not reflect the publisher nor employees’ views. Consult a financial professional before making financial decisions. Publishers or platforms may be compensated for access to third party websites.
