As your college graduation date draws ever nearer, you may be trying to figure out how to make payments on your student loans. You may have heard of online checking accounts that offer a rewards program, but what if you learned it could even help you pay off your student loan debt quicker? Before you jump into signing up, there are a few things you should know about these student loan debit cards.
SmarterBank launched a new Visa debit card in April that is attached to an online checking account offering graduates rewards of up to 1% on purchases that can then be applied to student loan debt. According to AnnaMaria Andriotis in her April 4, 2012 post, “Pay Down Student Loans — by Shopping?,” for Smart Money, “the size of those rewards will depend on several factors, including the purchases a cardholder makes — the more they swipe for, the more they can earn in rewards.”
To earn $10 in rewards, you’d have to spend roughly $1,000 per month. If you don’t normally spend $1,000 a month using your debit card, this program probably isn’t going to do any good for you or your debt. There are also several fees associated with this type of account as everything has to be done electronically over the phone.
Another disadvantage is that everything is done online — there are no branches to walk into when you have a concern with your account. Unless you have a job that allows direct deposit, you’re left to mail in your checks or transfer money online from an existing checking account.
Financial aid through prepaid debit cards
According to a May 31, 2012 report on Fox Business, “Student Loan Debit Cards Costing Students Millions in Fees,” almost 1,000 colleges around the country are pushing students to receive their financial aid refunds on a prepaid debit card. These can come with hefty fees students may be unaware of, including having to use a pin number with them at retail stores that costs an extra $.50 per use. According to Rich Williams, a member of the U.S. Public Interest Research Group, there are other fees such as an inactivity fee when the account is idle for six months or longer.
Be proactive: Do your research about account fees
The main things to keep in mind when opening a checking account:
- Look at the fine print for all fees
- Ask for a paper copy to keep in your records of all fees, and keep any correspondence sent from the bank or credit union regarding changes
- Don’t be afraid to ask if you have any questions about the account
- Be sure to check out your local credit union as fees are generally much lower or non-existent altogether
While we’d like to hope our schools wouldn’t take advantage of us by insisting we sign up for these high-fee debit cards and checking accounts for financial aid; the fact of the matter is, you need to inform yourselves about these types of programs and find one that best fits your needs.