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College Student Debit Card Fees Facing Scrutiny

By Audrey Asistio, KSEE24 News
July 24, 2012 Updated Jul 24, 2012 at 7:19 PM PDT

Check or direct deposit were the only options college students once had when receiving their financial aid. But now, at least 52 community colleges in California and a handful of universities are providing a third option- the debit card, through contracts with Higher One. Fresno State and College of the Sequoias provide this option.

Fresno State Associate Vice President for Financial Services, Clinton Moffitt said, “One of the advantages of the debit card will be same day access to your cash. In the past, with direct deposit, it takes about 3 days to get your money in your account and a check depends on the US Postal Service.”

College of the Sequoias Public Information Officer Kevin McCusker added, “In some ways it allows a lot of our students to avoid some costs. Not all our students have checking accounts or bank accounts when they get here.”

But Higher One is facing scrutiny for fees and marketing tactics. A lawsuit against the company claims the financial firm improperly disclosed debit card fees. It also claims the company created bank accounts for students without their consent.

“It is an issue for some places. Yes, we are trying to explain to the students how to use their card without incurring any fees and we are working with the vendor, Higher One, to educate,” said Moffitt.

When students activate a Higher One debit card, several fees apply. If they use the card at a retailer, and use the debit option rather than credit, they'll have to pay a $0.50 transaction fee. When students withdraw cash from an ATM that is not Higher One, they will be charged $2.50 on top of the fee the ATM owner charges. Students will also have to pay up to $10 a month if their account becomes inactive for more than six months.

Beginning this fall, all Fresno State students will receive a Higher One debit card. College of the Sequoias issues the cards only to students receiving financial disbursements. Students at both schools are not obligated to activate their debit cards.

College and university officials say they do not generate income from providing the debit card option.

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