It says they come with higher fees, few consumer protections and few options.
The Maryland Public Interest Research Group is warning college students and their parents about campus debit cards. The organization says these are bank-issued cards, and often contain the financial aid money that a student needs to pay for tuition, books and other supplies.
The organization says these cards could saddle students with a lot of debt, even before they graduate, and that’s not a great way for them to spend their college years.
"Financial institutions have partnerships with almost 900 campuses nationwide, and they’re putting bank products on student ID’s and other campus cards to become the primary recipient of billions in federal financial aid to distribute to students," says Jenny Levin, an advocate for Maryland PIRG, who calls these cards "wolves in sheep’s clothing."
Maryland PIRG has published a new report entitled "The Campus Debt Card Trap," which finds that banks and financial firms now control or influence federal financial aid disbursement to over 9-million students by linking checking accounts and prepaid debt cards to student ID’s.
The organization also says there’s big money at stake because the banks make huge profits siphoning off fees from student aid disbursement cards. They also include ATM and other transaction fees, overdraft fees, and interchange fees imposed on merchants who accept these cards. In 2011, Maryland PIRG says Higher One makes 80% of its revenues from these cards, totaling $142.5-million out of its $716.3-million it made. The organization cites filings with the SEC. "Every penny of financial aid money should be going to educational expenses, not an education in high bank fees," says Levin.
Maryland PIRG also says the neediest are the most impacted by campus debit cards, and the services seem to be endorsed by colleges and universities.
Levin says she would like the newly-created Consumer Financial Protection Bureau to upgrade consumer protections to include these types of cards. She says students can’t get a fair deal from these cards because the market is skewed against them, and colleges, universities and policymakers should use their authority to clean up this market.
Meanwhile, Levin strongly urges students and their parents to approach these cards with a great deal of caution. "They really want to be looking out for the fine print, any type of agreement that tacks on interest whenever they swipe their card," she says.