August 19, 2022
Categories: Checking Accounts, community, Credit Cards, Debit Card, Education, Financial Planning, Financial Wellness, In the Community, Protecting Your Accounts, Safety & Security, Savings Accounts
By Dawn Kellogg and Cynthia Kolko
College costs money. But while parents and students are calculating the expense of tuition, room and board, they can sometimes overlook the fact that students usually need additional funds for things like supplies, transportation and personal items (and maybe pizza).
A big question for parents and incoming first-year students especially is: “How much spending money do kids in college need these days?” Answers to that will differ of course: what do you define as “extras,” where is the campus located (everything costs more in cities), are you going home on weekends, will you have a car on campus, what is the social life like on campus, etc.
In addition to textbooks, school supplies, and clothes, other costs to be considered are phone bills, dorm furnishings, laundry money, food and drink outside of the meal plan, entertainment, local travel, recreational travel, campus parking permit, gas, and more. The first step is to talk about who is going to be responsible for these expenses.
The next step is for parents and students to ask each other the following questions: Will the student be in charge of their own savings? Will the parent be able to see the student’s account activity? Will the parent want to control the amount of available money at least for the first semester or two?
To give students a way to make purchases, parents typically choose either a debit card or credit card. Here’s a list of the advantages of each type of card to help you decide which will work best for your student, or if getting both is the way to go.
Debit Card Advantages
Convenience- Easier to tote around than a wad of cash or a checkbook, a debit card takes money directly from a checking account when used.
Versatility- Most debit cards can be used to make purchases online or right at the store, or as an ATM card for withdrawing cash.
Maintain spending limits- Some people recommend a checking account linked to a parent’s account. That way, students can use their ATM as needed, and parents can monitor the student’s spending behavior injecting extra cash when needed. When the checking account is empty, unless you’ve set up overdraft protection, your student can’t spend any more.
Tip: Overdraft protection is when the credit union or bank uses money from another of your accounts to pay for any debit card charges that the checking account can’t cover. Usually, there’s a fee for each of these transactions, so be sure to pick the overdraft protection option that’s right for you and your student.
Credit Card Advantages
Convenience- A credit card gives your student the ability to make purchases up to the credit limit you specify. Parents sometimes choose a credit card so the student can have access to money in case of an emergency.
Perks and points- Many credit cards offer choices like low rates or points, as well as perks such as extended warranties on purchases and protection when a store won’t accept a return.
Build credit- Even when the card is co-signed, paying the credit card bill in full and on time every month (and the same for any loan payments) reflects favorably on both your student’s credit score and yours. This can mean better rates in the future on mortgages, car loans and more.
Tip: With credit cards, it can be easy for students to charge more than they should. Carrying a balance on the card will most likely incur interest charges and could negatively affect both your student’s credit score and yours. Make sure your student only charges what he or she can afford to pay off each month. And consider setting a low credit limit on the card.
- Find opportunities to have FREE fun on campus and around the community. So many local attractions, stores, and other outlets have discounted or free stuff for students.
- Have and follow a budget.
- Revisit spending habits and needs each year.
- Be aware of “Card Cracking” and other scams. It’s important to be aware of fraudulent account activity and potential scams and know how to safeguard yourself against them. Know the difference between scams and fraud. Fraud is account activity made without the participation of account holders, such as account charges that the account holder didn’t make. (At The Summit, we regularly monitor members’ accounts, and we have several safety features to alert members of account activity.) In a scam, account holders are fooled into doing something. Perhaps they’ve made a purchase from a phony online business that they think is a real one, or they’ve purchased gift cards for a scammer as “payment” for a bill, or they willingly give account access to someone who then withdraws money.
Find out about The Summit’s debit and credit card options by calling our Member Services Team at (585) 453-7000 or (800) 836-7328.