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Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank

FDIC Consumer News

Spring 2015

For College Students: Passing Big Tests on Money Management

With their new independence, college students often must make financial decisions that can have consequences for years. And getting a student loan or credit cards can influence long-term financial success. Here are ways to strengthen decision-making skills.

Choose a bank carefully: Help your young adult shop around for a bank account that can be accessed using ATMs on or near campus without paying a fee. Consider opening an account before the start of the semester so it is ready to use when your child needs it, which may be before classes start. If your child has a job, consider encouraging him or her to sign up for direct deposit, which is generally the fastest and safest way to receive money or other payments.

Do your research before applying for a student loan: If your student has to borrow to pay for some or all of a college education, jointly review the different types of student loans. Choose one that's low-cost and has flexible repayment terms, which will generally be a federal student loan. The Consumer Financial Protection Bureau (CFPB) has a "Paying for College" Web page that includes a "shopping sheet" to help compare financial aid offers.

Understand the pros, cons and costs of debit and prepaid cards: Debit cards enable consumers to withdraw money from their checking accounts for purchases or cash. Prepaid cards are used to access money that has been loaded (added) onto the card, which is not connected to a bank account. Many colleges recommend or offer specific cards, often to disburse financial aid or other related funds. However, these school-affiliated cards are not necessarily the best deal for all students. To research and compare debit or prepaid cards and learn how to avoid overdraft fees, start at the CFPB's home page.

Use credit cards responsibly: While credit cards are a convenient way for young people to establish a credit history, they can make it easier to spend money. Purchases that cannot be paid in full by the due date will incur interest. Some young people end up carrying balances on their credit cards and pay significant interest costs for years. And, running a balance that is close to the credit limit can hurt a young adult's credit score. This makes borrowing more expensive and counts against them when they apply for a job, an insurance policy or an apartment. For tips on using credit cards wisely, see the Winter 2013/2014 FDIC Consumer News.

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