New federal regulations make it harder for credit card companies and other financial institutions to promote credit cards to college students on campuses. So, should students open checking accounts? There is another alternative, and that is the pre-paid credit card.
Pre-paid credit cards are not linked to a bank account. Rather students can put money on the card from their own funds, from parents’ monies, or even from financial aid funds. Students can find these cards at American Express, online, at Barnes and Nobles on-campus book stores, and some colleges are even offering prepaid cards through their own ID card systems.
There are advantages:
- There are no late fees.
- It is a quicker and more streamlined way for receiving financial aid monies.
- Cash can be withdrawn on the card.
The disadvantages are
- These cards are not always insured by FDIC.
- You may have to pay to buy a card.
- There may be fees for reloading the card with more money.
- There are fees for withdrawing money after the first free monthly cash withdrawal (up to $2 per subsequent withdrawals).
Pre-paid cards can be convenient, help in budgeting, and make for an easy way to handle financial aid for students. However, you must also consider the down sides such as the cost to buy a card, various fees, and lack of FDIC protection.