Combo ID/debit cards snare students
TEXT OF INTERVIEW
Lisa Napoli: Call me sentimental, but for some reason, I like to keep my old ID cards.
I have my college ID — that’s from a long time ago — and ID cards from at least a couple of old jobs.
Some universities are trying to make the ID card more than just a way to check out books at the library by having them serve double duty as debit cards. That’s raising a host of questions.
Kathy Chu wrote about the controversy for the USA Today.
Lisa Napoli: Kathy, how do these things work?
Kathy Chu: It’s usually a contract between the university and a financial institution and the university gets money based on a few different factors. One is the number of bank accounts that are open that are linked to the ID card. Second, some universities will also get money based on how much students spend.
Napoli: Are you obligated to use it? Is there any way around this or do you have to use it if you’re a student at one of these schools?
Chu: You don’t have to use it, Lisa, but the problem is, at some schools, including Portland State University, the students said it’s been very difficult for them to opt out of it. For example, if all of the students would get an ID card with a MasterCard logo and they could sign up and link their bank accounts with this partner institution to the ID cards. They could also opt-out of the bank account, meaning it would not be linked to their ID card. But when students went online to try and opt-out of the bank account, too many of them found themselves accidentally signing up for the cards. And this is the case at other universities as well. So, to their credit, Portland University and the bank that it partnered with changed the activation process so that it wasn’t as difficult to opt out of the bank account.
Napoli: And it’s not just that students are upset that they’re locked in to this. They’re upset about the fees.
Chu: They’re upset about a few things, Lisa. Overdraft fees is one. Now, over the years, banks have increasingly allowed you to overdraw on not only checks, but on small dollar amount debit card transactions. So, in the past, if you tried to use your debit card for something you didn’t have money for, the bank would reject the transaction — no fee involved. Nowadays, they’ll approve the transaction, even if it’s for a $2 cup of coffee, and they will charge you a $30 fee for it.
Napoli: And they’re not told about these overdraft fees to begin with? Or is it in the tiny, fine print kind of thing?
Chu: They’re given disclosures, sure, so you can argue that they are told about the overdraft fees, but students’ argument and consumer advocates’ argument is, “Listen, we don’t have a lot of financial experience.” If a university is going to be partnering with a bank, why allow the students to overdraw and then charge them a stiff fee for doing so?
Napoli: Sounds like some people are learning this lesson the hard way. Do you have any tips or advice for people who are heading off to college about how to buyer beware with these things?
Chu: The first thing you want to do is if your university has a partnership with a bank related to debit cards or to credit cards, never assume this is the best account or product for you. If you’re going to get the debit card offered by the university, ask what concessions you can get and what I mean by that is ask the university, ask the bank if they will wave certain fees, such as overdraft fees. Very often they will do so if you ask. And obviously, balance your bank account and don’t spend more than you don’t have. Try to be financially responsible.
Napoli: Kathy Chu is a personal finance reporter for USA Today. Thank you Kathy.
Chu: Thank you Lisa.
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