Q: I'm going to be starting college in the fall. Where do you suggest I look to find good savings and checking accounts for college students?
A: It makes sense to focus on the checking account first, because finding a good one can be a big challenge for college students.
Free checking accounts are becoming increasingly rare. The most recent MoneyRates.com Bank Fee Survey found that just 36.6 percent of checking accounts now are free of any sort of monthly maintenance fee. Since those fees come to a total of more than $140 a year on average, they can take a serious chunk out of the typical student's account balance.
While banks will frequently waive monthly checking account fees under certain conditions, college students often don't have the two things most often necessary to qualify for those fee waivers: a weekly paycheck to be directly deposited or a large account balance.
Still, there are ways a college student can find free checking. One good place to look is online banks. Here are some reasons why online banks are often an especially good fit for younger people:
- They are more often likely to offer free checking accounts. Two-thirds of online checking accounts have no monthly fees, compared to just over a third of checking accounts at traditional banks.
- They have smaller minimum balance requirements. Those smaller balances are often a better fit with the limited finances of most college students.
- When they do charge fees, those fees tend to be lower. This is true of monthly maintenance fees, overdraft fees and ATM fees.
- They offer geographic flexibility. This is important for students who travel frequently between home and college. Just make sure you choose an online bank with an ATM network that covers both places.
- Today's college students have grown up with the Internet. This makes that generation especially comfortable doing business online.
Online banks are not necessarily the only good option for college students. Some traditional banks offer special accounts for students, with low balance requirements and no monthly fees. These special accounts are most often found at community banks, but some larger institutions offer them as well.
As for savings accounts, college students face the same challenge all savings account customers face today: Interest rates on those accounts have shrunk to practically zero. According to the FDIC, the average interest rate on savings accounts is now down to just 0.06 percent. However, you can find savings account rates more than 10 times that average if you shop around. Online banks are a good place to look, and when comparing rates, make sure you can meet the balance requirement for the rate being advertised.
Got a financial question about saving, investing or banking? MoneyRates.com invites you to submit your questions to its "Ask the Expert" feature. Just go to the MoneyRates.com home page and look for the "Ask the Expert" box on the lower left.