It’s back-to-college season! Whether you’re a freshman or a senior, making smart decisions during your first couple months in college will go a long way toward making it through the academic year. College is a time for learning and independence, and part of the college experience is learning to become financially independent. Financial independence is easier said than done, however. Most college freshmen are used to quite a bit of financial support from their parents. But when you go to college, you are pushed to budget and plan by yourself.
[Be smart with your money—apply for scholarships to lower your tuition.]
With the college experience comes student checking accounts, credit cards, and for most of us, student loans. If you are anything like most college students, preparing for your financial life might be a little overwhelming. In this article, we will highlight a few tips to get you started down the right path. Managing your money in college will pay dividends long after graduation!
1. Avoid Bank Account Fees
Banking fees have plagued college students since the dawn of time. If you aren’t careful, ATM fees, low-balance fees, and checking account fees can really add up over the course of a semester. Setting up a checking account in your own name is the first step to becoming a financially savvy student.
When you look for your first independent bank account, you should look for fee-free accounts. Capital One 360 is an excellent option for college students. I’ve been using Capital One 360 since it was ING Direct, and let me tell you, I’ve never paid a fee. As crazy as that sounds, Capital One 360 charges no fees—no overdraft fees, no ATM fees, no account minimum fees, no account activity fees, and no check deposit fees. For the college student who likes ATMs, Capital One ATMs are probably located all across campus and in nearby shops. Capital One doesn’t have branches or their own ATMs, so they partner with external ATM companies to let you use an array of ATMs for free.
You should also look at local banking options. Most likely, your school has partnered with a regional bank or credit union. It might be worth setting up a secondary bank account at a local bank to get free access to close-by branches and ATMs. Moreover, I bet local banks have student accounts with minimal or no fees as well.
2. Get a Student Credit Card
It is never too early to start building credit. Upon graduation you are probably going to be looking for credit in one way, shape, or form. If you start building credit in college it will go a long way toward getting you approved for an auto loan or a mortgage after graduating.
There are tons of credit card companies and banks who offer credit card products for college students. These cards usually have low credit limits and minimal benefits. That being said, if you keep a small balance and pay off your bill each month you will start building positive credit. Eventually, the credit card companies will give you greater limits and benefits.
But wait! Don’t get stuck in credit card debt. Building credit is different from building a credit card balance. It can be tempting to overspend on your credit card. And when you turn 21, it gets even easier to overspend. Trust me. According to CreditCards.com, the average credit card balance among college students in 2013 was $499 and the median was $136. Carrying a credit card balance is expensive. Most student credit cards have high interest charges so keeping a low balance is a must.
3. Pay Student Loan Interest In-School
Most college students have student loan debt at some point during their college career. You can save yourself a lot of money if you pay your accumulated student loan interest during school. Depending on the type of student loans you have, interest may accumulate while you are enrolled in-school. Unsubsidized federal student loans will accumulate during periods of deferment. And, private student loans will always accumulate interest. If you don’t pay off your interest during college, the interest will accumulate and be added to the balance of your loan. At this point, the accumulated interest will start to accumulate interest itself.
By paying down your student loan interest each month you can save yourself a couple thousand dollars in interest payments when your repayment begins. Paying student loan interest during school sounds like a difficult task, but if you can manage it, you will thank yourself later on in life.
College is a time for learning. Learning to become financially-savvy during your college years will go a long way even after graduation.
Nate Matherson is the Co-Founder of LendEDU. LendEDU is a marketplace for student loans and student loan refinance.