Trying to find the best bank or credit union for college students can be overwhelming. There are so many options that you don’t know how to choose. Luckily, the process isn’t as difficult as it seems.
College students can choose the best bank or credit union for them by ensuring that it is FDIC or NCUA insured and has good security, website/app, and customer service. Compare the fees, interest rates, minimum balance requirements, ATM network, and additional perks each bank offers.
Basically, you just have to decide what is most important to you and then do your research.
Keep reading to learn about the different types of banks, if a bank or credit union is better, the criteria to consider when picking a bank, and my recommendations for the best bank or credit union for college students.
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Comparing banks and credit unions
First, let’s quickly cover your main types of banks for checking and savings accounts.
Banks (retail banks) are financial institutions that provide services such as checking and savings accounts and loans.
Credit unions are cooperative groups. A credit union offers the same services as a bank but has a different structure.
Banks are owned by investors, and credit unions are “owned” by their members.
Banks aim to make money for their shareholders. Since credit unions are not-for-profit, they are not driven by profit and instead can focus on serving their customers/owners.
This means that credit unions can offer favorable benefits. They tend to offer higher interest on the money in your accounts and lower fees than traditional banks.
Student credit union
A student credit union bank is a credit union for students. It offers all the regular services of a credit union or bank, such as savings and checking accounts, loans, and debit cards. It can also offer additional deals for students and resources to help students learn personal finance.
Since they are often run by students for students, they offer internships or part-time jobs for students, and since it is a credit union, it will typically have lower fees.
Online-only banks/credit unions
Online-only banks/credit unions are exactly what they sound like— a bank that doesn’t have a physical location. You cannot go into a branch.
There are some big pluses to online banks. According to NerdWallet, online-only banks often have lower fees and higher interest rates because they don’t have the cost of needing a physical location.
Online banks/credit unions can also be very convenient, but some people would not like not being able to go into the bank if they want to.
For students that are busy or for anyone with health issues, the convenience of online banks can be well worth it. I know that if I can do it all from home, I don’t want to go into a bank anyway.
If you decide you are comfortable with the format, make sure that you look into their customer service (how you can talk to someone since you cannot go into the bank if there is a problem) and how they deal with cash (which we will discuss more below).
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Is a credit union better than a bank for college students?
A credit union is typically better than a bank. Credit unions are nonprofit organizations, so they can be more focused on their customers and offer more personalized customer service. They typically have lower fees and better interest rates for savings accounts.
Credit unions also often offer education on personal finance and lower interest rates on loans or credit cards.
The disadvantages of credit unions are that they have only a limited number of branches, may have a smaller ATM network, and may have eligibility criteria to become a member, such as those with a specific employer or who live in a specific area.
One way to avoid these problems is to get an online-only credit union.
I highly encourage you to consider choosing a credit union!
Student bank account vs. normal account
At banks or credit unions, you may hear about student bank accounts and wonder what a student bank account is.
A student bank account is a bank account specifically for college students. They are offered to attract young customers (ages 17-24). They offer benefits such as limited or no fees or minimum balance requirements, low or no overdraft fees, sign-up bonuses, and cash back or discounts on purchases.
To open a student bank account, banks require proof that you are a student, such as an acceptance letter, letter of enrollment, student ID, or transcript.
Advantages and disadvantages of a student bank account
Let’s look at some advantages and disadvantages of a student bank account.
Advantages of a student bank account
Some common features that student bank accounts offer are:
- Limited or no monthly fees
- Low or no minimum balance requirements
- Low or no overdraft fees
- Lower age restrictions
- Possible sign-up bonuses, such as a railcard or cash bonus
- Rewards such as cash back or discounts on purchases, especially those related to school, such as textbooks or school supplies
- Access to student credit cards or student loans, which can help you build credit
Disadvantages of student bank account
Some disadvantages of student bank accounts are that they often:
- Only last for a limited time
- Have age restrictions, such as being 25 or younger
- May require you to be a full-time student
- Some require you to be enrolled at a specific college
- Offer lower interest rates on savings
- May have higher interest rates on loans or credit cards
Additionally, some benefits are limited (such as only for the first year) and then revert to higher fees or lower interest rates, so make sure you read the fine print.
How to know if my account is a student account
Sometimes people are not sure if their account is a student account. You can find out by checking the terms and conditions of your account or by contacting your bank.
How long do student bank accounts last
Student bank accounts are temporary accounts to be used while you are in college, but how long student bank accounts last will vary depending on the bank. Banks offer student bank accounts until you graduate, turn 25, or their set period of time ends (often 4-5 years)—whichever one comes first.
Banks can determine when you graduate by asking you to report it or by going off the date you list as when you expect to graduate when you first opened your account. If you are still in college past this date, you may be able to extend your student bank account.
When the time ends, some banks automatically convert to a regular account. Some banks convert your account to a graduate account (an account that transitions between the benefits of a student account and a regular account). Others require you to close your account or open a new traditional account.
Read the terms and conditions of your bank account or contact your bank to learn how long their student bank accounts last and what happens when that time ends.
Is it worth switching to a student account?
Student bank accounts are good, but students do not need to have a student bank account.
In general, it is not worth switching to a student account since traditional accounts can offer no fees and higher interest and are not for a limited time. However, it can be worth switching to a student account if the benefits are good enough, such as a lower age restriction, student credit card, or cash back/discounts on necessary purchases.
If you want a student account for the low or no overdraft fees, check the limit and that it is “guaranteed,” not listed as “up to,” because that means that you will only get the overdraft if you have a good credit score.
Also, consider the hassle of changing accounts to a new account once you are no longer a student and the fees and interest the bank’s traditional accounts have. It may save you time and money in the long term to stick with a regular account.
For example, Bank of America offers a Student Account with no monthly fees, and Chase offers a Chase College Checking Account with no monthly fees and a sign-up bonus. However, once you graduate, your 5 years are up, or you turn 25, your account starts having fees. I would skip this and get an account with no fees from the start.
I have not found student accounts that are better than the regular accounts recommended below, but you can add student accounts to your list of potential bank or credit union accounts and compare them to all the others. Pick the account that best suits your needs.
What to look for when choosing the best bank or credit union
It is best to pick a bank that offers the accounts you need. For example, many online banks offer savings accounts but not checking. I would not choose this bank, at least not for your primary bank.
The most basic accounts that you will need are saving and checking accounts.
FDIC or NCUA insured
Make sure that your bank is insured.
For banks, that would mean they are insured by the Federal Deposit Insurance Corporation (FDIC). For credit unions, the National Credit Union Administration (NCUA) insures them.
This means that your money is protected if the bank were to fail. The standard amount insured is $250,000 per depositor, per FDIC-insured bank.
You need this!
If you do at least some online banking (which I am guessing is most people), make sure that you like their website or app.
According to Lifehacker, you want to make sure that your bank offers
- online security and zero-liability fraud protection for debit cards
- two-factor authentication (makes you go through an extra step to verify your identity)
- transaction encryption (at least 128-bit encryption)
You also want to find out how to contact your bank if your ATM or debit card is stolen or you suspect fraud and how to stop payment on a check.
Good customer service is worth a lot.
Look at ratings and reviews.
Call their customer service to see if you can easily talk to an actual person and get help with any problems.
Savings account things to look for when you choose a bank…
APY stands for annual percentage yields. This is the interest that your money in the account earns. Obviously, you want a higher APY.
Check out what each bank’s rate is for their different accounts. Also, check how long the rate is offered—some offer a great rate, but only for the first year, and then it drops. You want to avoid these.
Look for the:
- Savings initial deposit requirement (how much you have to deposit when you open the account)
- Savings minimum balance (the minimum you have to keep in the account at all times)
Check what the monthly maintenance fees are. There are a lot of banks with no fees or fees that can be waived if you meet the minimum balance requirements, get paperless statements, have another account with them, set up automatic savings, etc… Each bank’s fees and/or requirements to get them waived are different, so make sure to research this!
Additionally, check for any hidden fees. These can add up.
Subaccounts can make saving easier, especially if you are saving for a goal. You can have an account for holidays or vacations.
If this is something that you want, then check that the bank offers subaccounts.
When choosing the best bank or credit union, make sure to look at:
Check what the initial deposit requirement is and the minimum balance that you always have to have in your checking account.
See what the checking monthly maintenance fees are.
Also, check for hidden fees such as:
- a fee for processing checks
- fees for ATM use
- overdraft fees
If overdraft protection is important to you, see if they offer it for free or what the fee is. Banks will often advertise overdraft protection like it is a big benefit to you but then charge huge fees.
Overdraft protection is not the same thing as no overdraft charges. With overdraft protection, your transaction is approved even if you don’t have money in your account, but you are charged a big overdraft fee.
Look for banks or credit unions that offer NO overdraft fees.
Also, make sure that you check how long the current fees last since banks will offer low fees for the first year and then charge much higher after that. You don’t want to transfer banks in a year, so avoid these limited-time offers.
Accessing your money
Think about how convenient it will be to access your money online or if they have a branch near you.
Find out how long it takes for deposits to be credited to your account.
Look at all the ways you can access your money:
Does the account come with a debit card? Also, see if there is a limit on the number of debit card transactions you can make each month.
Does the account come with the first checks free? What is the cost of 100 checks?
Also, make sure you can deposit checks with your cell and see if there is a limit to the number of checks you can write each month.
Do they have a broad ATM network? What are the fees for ATM use?
For online-only banks, you also want to know if it is free to deposit cash.
Look at any additional perks, such as no foreign transaction fee (this is important if you are or will be studying abroad), cash back rewards, sign-up bonuses, and discounts on purchases.
Resources to check out banks before you choose one
Here are some sites that you can use to read reviews on banks.
Word of caution on switching banks. Make sure to get documentation from the bank that your account is closed. Otherwise, banks will sometimes reopen accounts.
Best bank or credit union for college students
The best bank for college students is Ally Bank, and the best credit union is Alliant Credit Union. Both are online and have a good website, app, and customer support. There are no monthly fees, no overdraft fees, or minimum balances, and they offer high-interest rates on the money in your accounts.
I use Alliant Credit Union and highly recommend them. They are the best credit union (or bank) for college students (or anyone that does online banking).
Let’s look more at some of the best banks and credit unions for college students.
Best bank for college students
The best bank to have as a college student is one that fits all your needs and has no fees.
Let’s look at some of the best banks for college students (including online banks):
1. Ally Bank
Ally Bank is a great online bank with a clear website, app, and 24/7 customer support. They have no monthly fees and no minimum balance requirements.
They have one of the best overdraft services. They charge no overdraft fees and offer CoverDraft, which provides up to $250 in temporary coverage if you don’t have the funds in your account.
They also offer high-interest rates on the money in your accounts.
They have no fees at over 43,000 Allpoint ATMs nationwide and will reimburse you up to $10 each month for fees from other ATMs.
One downside is that they do not accept cash deposits.
2. Capital One
Capital One offers a Money Teen Checking Account and a 360 Checking Account.
The Money Teen Checking Account is a great option for anyone under 18.
Both have no monthly fees or minimum balance requirements. It also offers a high-interest savings account.
Capital One has a huge ATM network with over 70,000 fee-free ATMs nationwide.
While Capital One is primarily online and has a great app, there are physical locations called Capital One Cafes, and they partner with CVS to allow you to add cash to your account there.
While their overdraft services are not as good as Ally, they do not charge overdraft fees, and they may cover the transactions. You can select from the overdraft options for the payment to be declined or to automatically transfer funds from another account.
3. Discover Bank
Discover is a great choice to avoid hidden fees. They have no monthly fees, no minimum balance requirements, no overdraft fees, or no ATM fees at over 60,000 ATMs nationwide. They also offer a high-interest rate on their savings accounts.
Discover is an online bank, so there are no physical branches, but they have a good website and app and excellent customer service over the phone. I have a credit card with Discover, and their customer service has been fantastic. Anytime I have had an issue, I call and quickly talk to an actual person who is able to help me solve the problem.
Discover also offers other benefits, such as 1% cash back on debit card purchases of up to $3,000 each month and free checks and replacement debit cards.
While these benefits would normally make Discover one of the best banks, as of December 2022, Discover is not accepting new customers for their checking account. You can sign up with them to be notified when they start accepting new customers again.
Best credit unions for college students
What credit union is best for students depends on where you live and which features you prioritize. Some of the best credit unions for college students are:
1. Alliant Credit Union
Alliant Credit Union is an online credit union that is open to anyone. You can join if you live or work near their Headquarters in Chicago, for one of the businesses or organizations they partner with, or are a partner or family member of a current Alliant member. If not, you can join by becoming a member of Foster Care to Success (FC2S)—it takes no time, and Alliant will pay the $5 membership fee.
A few years ago, I compared over 50 different banks and credit unions, and Alliant was the best I could find. I have banked with them since, and I love them.
Alliant has no monthly fees, no minimum balance requirements, high-interest rates for the money in your accounts, a great website and app, and excellent customer service. I have called several times and am always able to quickly talk to a nice representative that is able to address my concerns.
They are easy to get checks and a debit card from, accept cash deposits, and are great at depositing checks with your phone.
They also have no overdraft fees, a large network of over 80,000 ATMS for no fees, and up to $20 a month in ATM fee rebates if you use out-of-network ATMs.
2. Local credit unions
Many credit unions have stricter membership eligibility. Check out your local credit unions—they often charge no fees, have no minimum balance requirements, and offer other perks.
Some credit unions to check out if you are eligible, include:
- BECU if you live in Washington or select areas of Oregon or Idaho
- Digital Federal Credit Union if you live in Massachusets
- Golden 1 Credit Union or SchoolsFirst Federal Credit Union if you live in California
- Mountain America Credit Union if you are related to a member or live in Utah, Idaho, Arizona, New Mexico, Montana, or Nevada. They offer a TON of extra benefits.
- Navy Federal Credit Union if you have served in any branch of the armed forces, work for the Department of Defense, or are related to someone who served or works for DOD
In the end, choosing a bank is a personal decision. Do your research and then pick the one that best fits your needs.
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