Money Plans for College Bound Students
This fall, millions of students will arrive at college campuses across the nation. Students and their parents face a number of financial decisions and transactions that can have an impact on their finances.
Here's my guide on what parents and college bound students need to know about the financial tools and decisions that they will confront.
Monitor Accounts:
According to the CARD ACT, since Feb. 2010, credit card marketers must stay at least 1,000 feet from college campus if they are offering freebies in exchange for signing up for credit cards. The CARD ACT restricts students under 21 from getting new credit card accounts on their own unless they get co-signers or show they have the means to pay the bill.
This doesn't mean students will not be offered credit cards on campus. Credit cards will still be offered indirectly as part of a marketing promotion for banking accounts. And students under 21 can have an older student or friend co-sign a credit card application.
The challenge is that most high schools and colleges do not provide students with courses on how to use properly use credit cards and the skills they'll need for basic financial management. And while there are some schools where these classes are available, they are electives, not requirements.
Parents need to face up to the reality that their student will most likely find a way to get a credit card. Parents who want to supervise their student's usage of a credit card should never sign-up as a joint owner with their student on a credit card - this is an invitation to credit problems and identity theft for both the parent and the student when a student's credit card is lost or stolen. Parents who want to monitor their student's use of a credit card will need to be designated to receive duplicate statements or set up on-line access to view the account activity.
Get a Checking Account:
Even if they never write a check, students will need a checking account. That's because these accounts provide for daily withdrawal demand from ATMs and by debit card. The most frequent transaction by a student will be using their debit card and hitting up the ATM for cash. Look for an account at the college credit union or local bank, to avoid the $1 to $3 transaction fees for using out of network ATMs. Title the account in the student's name with a POD to the parents. POD means "Payable On Death" and in essence it is a way to designate a beneficiary for the account. Avoid the overdraft credit, which only encourages spending money that isn't there and is sure to rack up more fees when used. Parents who want to monitor their students spending can set up on-line access to their students account and also request to receive duplicate statements. With web access, parents can even transfer money on-line to their students account on a scheduled basis or as needed.
Check back in a few days when I'll write about more money moves for college bound students and their parents.
Ray Martin
View all articles by Ray Martin on CBS MoneyWatch»
Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch.com and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.
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