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Understanding Student Checking Accounts and Their Impact on Credit

At O1ne Mortgage, we understand the importance of building a strong financial foundation, especially for students. While having a student checking account won’t directly impact your credit score, it can help you gain access to credit in the future—especially if you keep your account in good standing and use it to automate bill payments so you’re never late.

Does a Student Checking Account Impact Credit?

If you have a student checking account, you typically won’t have to worry about it affecting your credit since banks and credit unions don’t report your banking activity to the three national credit bureaus (Experian, TransUnion, and Equifax). Although your student checking account won’t directly impact your credit, it’s still important to keep your account in good standing.

If your student checking account balance dips into the negative and you get hit with overdraft fees that you don’t pay, your bank could eventually send your account to collections, which could ding your credit score.

Showing a pattern of responsible money management by paying all your bills on time can help you get approved for credit in the future since your debt payment history is the biggest factor in calculating your credit scores. Plus, having a student checking account can make it easier to get approved for a loan because creditors can easily check your cash flow and verify your income when you apply.

How to Choose a Student Checking Account

If you’re thinking about opening a student checking account, you’ll want to compare types of banks, fees, mobile banking apps, and any extra features that may be available.

Type of Bank

You can open a student checking account at most banks, credit unions, or online-only banks. Here’s what you need to know about each type of bank:

• Traditional banks: Traditional banks often have many brick-and-mortar branches and ATMs, making it easy to do your banking in person and access cash if you choose. If you plan to do your banking on-site, it’s a good idea to look for a bank that has locations near your college. Fees can be higher at some traditional banks compared with credit unions, but you’ll usually get a wider range of services and mobile features.
• Credit unions: To open an account at a credit union, you or your parents will likely need to sign up for a membership since credit unions are member-only institutions. Credit unions generally offer lower fees and higher rates than traditional banks but may be limited when it comes to digital banking options. Credit unions also tend to be located in just one region, which could be an issue if you’re attending a college far from home.
• Online-only banks: If you’re looking for a checking account with minimal or no fees and lots of mobile features, an online-only bank may be a good choice. Although they don’t have physical locations or branded ATMs, these banks are usually set up to offer you the flexibility to do your banking from anywhere. They also often have a network of partner ATMs you can use without paying a fee. Most of these types of banks do offer convenient customer support online or over the phone.

Bank Fees

Both traditional and online-only banks, along with credit unions, will likely charge different kinds of fees such as maintenance fees, transaction fees, or service fees. And if you don’t have enough money in your account to cover a transaction, you could be on the hook for overdraft fees or nonsufficient funds fees.

Your bank could also hit you with a fee if you’re not keeping the minimum required balance or use an ATM that’s out of the bank’s network. To help stick to your student budget, be sure you know what types of fees you can expect before opening your student checking account. If possible, look for a student checking account that has no fees or low fees.

Mobile Banking Features

If banking on the go is important to you, you may want to pick a bank that has a user-friendly mobile banking app. When choosing a bank, think about the features that would make banking more convenient for you, including mobile check deposit, credit alerts, and budgeting tools. Traditional banks and online-only banks often have more robust digital features than credit unions, so keep that in mind when shopping around for your student checking account.

Insurance Protection

Choosing a bank where your money is protected in case of bank failure is important. Most banks are insured, but not all. If you open a student checking account at a traditional bank or online-only bank, it’s likely covered by insurance from the Federal Deposit Insurance Corp. (FDIC). The FDIC insures eligible deposits up to $250,000 per depositor, per insured bank for each ownership category. When banking at a credit union, your money will likely be insured by the National Credit Union Administration (NCUA). NCUA-insured credit union accounts are protected up to $250,000 per person and ownership category.

Extra Perks

When comparing bank features, ask about any extra incentives or conveniences that may be available to you as a student. Depending on the bank, these may include:

• Low opening deposit requirements
• Cash bonuses for opening an account or depositing a certain amount
• Ability to link your account to your student ID card for simplified transitions
• Option to open a student credit card through the bank
• Mobile payment options such as Zelle

Tips for Building Your Credit As a Student

Establishing credit in college can help increase your chances of getting approved for things you’ll need come graduation, like rentals, loans, and credit cards—without needing a cosigner. Here are a few ways you can start building your credit as a student:

• Open a secured or student credit card: A secured credit card can be a great option if you don’t have a credit history. Although you’ll need to put down a deposit, once you’ve established a positive payment history, the bank or card issuer may give you the option to switch to an unsecured card. And if you’re 18 or older, enrolled at a college or university, and earn an income, you may be eligible for an unsecured student credit card.
• Ask to be added as an authorized user: Asking your parents or a loved one to add you as an authorized user on one of their credit card accounts can give your credit an instant boost. This doesn’t require a credit check, and the account will be added to your credit history. This can help bulk up your credit file, but only if their account is in good standing.
• Get a credit-builder loan: With a credit-builder loan, you can start building credit and establish savings since the lender sets aside the loan amount—usually between $300 and $1,000—in a savings account until all payments are made. Plus, typically the lender will report your payment history to the three credit bureaus (check to make sure this is the case), which can help you establish a good credit history when you pay on time.

The Bottom Line

Having a student checking account won’t directly impact your credit, but it can be a great way to start building a solid financial foundation. From convenient direct deposit of your paycheck to budgeting tools that make it easy to stay on top of your student budget, student checking accounts can help you take care of lots of different banking needs while you’re away at college. They also may come with access to extras, like cash bonuses, which is a nice perk.

For any mortgage-related needs, feel free to call O1ne Mortgage at 213-732-3074. We’re here to help you navigate your financial journey with confidence.

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