The Pros and Cons of a Student Bank Account

Student bank accounts are specifically designed to help students and young adults become financially responsible citizens, through the development of healthy banking habits. Student checking and savings accounts are set up with terms and conditions that let the student safely build a good credit score and financial relationship with the bank.

Student bank accounts bear many obvious advantages and are perfect for most young adults. However, there are also some disadvantages associated with student banking that are often overlooked. Anyone interested in opening a student bank account should consider the following pros and cons of student banking.

The Pros of a Student Bank Account

•    Low/No Opening Deposit and Fees

Most student bank accounts do not have a minimum deposit amount, and those that do usually require no more than $100. Maintenance fees and other standard fees are also nearly nonexistent with a student bank account, as most banks typically try to provide students with an enjoyable first banking experience.

•    Low Interest Rates for Credit Cards

Most banks will offer credit cards to young adults who apply for a student bank account, and in most cases these cards carry lower interest rates. Although annual percentage rates are rising in Australia, some banks have lowered the rates offered to young adults and students to solicit new credit account holders. Aside from the low interest rates, many student credit cards offer additional benefits as well.

•    Bill Pay and Credit Counseling

Many banks offer bill pay services with student bank accounts, which makes it easier for the student to pay creditors and service providers. Many banks encourage their account managers to provide credit and bank counseling to young adults and students who are opening their first account or applying for their first credit card.

The Cons of a Student Bank Account

•    Low Interest Rates

Since the balance of a student bank account is often low, most student bank account will earn little to no interest. Fortunately, earning interest is not a high priority for many young adults.

•    Required Co-Signor

Most banks will require a co-signor if the account holder is under the age of 18, and in some cases the co-signor will need to be a legal guardian. Fortunately this should not be an issue for college students or other young adults.

•    Student Account Expiry

Unfortunately there comes a time when every student bank account is transformed into a standard transaction account. When this happens there will be a higher minimum account balance, higher interest rates, and stiffer penalties for overdrafts.