This was probably inevitable: the minute that Dodd-Frank cracked down on the fees charged by credit cards aimed at students, some other bright financial innovation would crop up. This time, a debit card aimed at students. Which carries lots of fees. Ylan Mui reports that a company called Higher One has started signing up colleges around the country, taking on the burden of providing cash to students. In return, it gets lots of fees:
Students say several of the fees associated with Higher One’s card are particularly irksome, including the $19 inactivity fee, a 50-cent charge for using a PIN to make a purchase rather than a signature, and a $2.50 fee for using other banks’ ATMs…
Higher One said that only 1 percent of customers have been charged an inactivity fee and that more than half are charged the 50-cent fee only once. All fees are listed on Higher One’s Web site, along with tips on avoiding them.
“We have a big effort with educating students on how to use the account,” Smith said. “We’re very passionate about financial literacy.”
If the fees are listed on Higher One’s website, they’re not exactly prominent. I did find this page, eventually, via this blog entry, but it just says that “when you swipe & sign, you won’t be charged the PIN-based transaction fee”. I haven’t been able to find a page showing a 50-cent transaction fee anywhere*, although I did manage to find this page, showing a $25 fee for domestic wire transfers and a $50 fee for international wire transfers. “Higher One offers less costly alternatives for transferring funds”, it says, without giving any indication what they might be; I suspect that what they’re talking about is transfers to or from people who have already registered somehow with Higher One.
It should go without saying that any firm which is “very passionate about financial literacy” would encourage, rather than penalize, simple, cheap and safe PIN-debit transactions. It would not give students a debit card and then tell them that if they want to avoid fees they should select the “credit” option rather than the “debit” option when they come to pay.
And I can’t think of any good reason to charge a $19 inactivity fee to people who haven’t used their cards in 9 months.
The fact is that students are often very naive when it comes to money, and it’s easy to gouge them once or twice before they learn that banks are not necessarily on their side. If you can get your card accepted by a majority of freshmen every year, and then come up with all manner of weird fees to hit them with, that’s a great way of making money out of ignorance.
Meanwhile, all students should have a bank account: giving them a debit card instead only serves to maximize the number of unbanked students. So while I’m sure cards like this are attractive to colleges, it would be great if either the colleges or else the Consumer Financial Protection Bureau started being a lot more critical of them. Prepaid cards only ever make sense if the alternative is being completely unbanked; that should not ever be the case for students.
*At Southern Oregon University, Higher One agreed to waive the 50-cent PIN-debit charge, but only if there was a simultaneous “swipe-and-sign” campaign. If the campaign is unsuccessful and students do the sensible thing by using PIN debit, then the university can be charged $2 per student for “PIN fee elimination”.
Update: Higher One’s Donald Smith responds:
Higher One was founded 10 years ago by three college students (undergraduates at the time) who were looking for streamlining the way financial aid refunds were distributed to students. Today we work with more than 675 campuses across the country, have a 97% client retention rating, and an A+ rating with the BBB.
The OneAccount is Higher One’s optional, no minimum balance, no monthly fee, FDIC-Insured checking account created by students for students. We do not offer a stored value card. We are very open with our fee schedule. We post it on every program website for all to access, explain each fee, discuss how to avoid each fee, and provide students with a web page that tells them how to use the account for free (which you’ve already found). Because of this, we believe that our customers pay less than half the amount in fees that the average bank checking account customer pays per year.
Two of the fees you referenced in your blog are the PIN fee and the Abandoned Account Fee. The PIN fee is easily avoided by choosing a signature based transaction at the checkout. The majority of students uses it in this manner and is in turn protected by MasterCard’s Zero Liability Policy against fraudulent charges (a safer way of purchasing than a PIN based transaction). We do not have an inactivity fee on our fee schedule – we don’t penalize students who do not use their accounts. We do have an Abandoned Account Fee of up to $19, for those who have abandoned their accounts, but this has been charged to less than 1% of all OneAccount holders in our company’s history because of our proactive outreach plan.
Higher One offers no instruments of credit. As a matter of fact, we’re generally in favor of initiatives restricting students’ access to credit cards and promoting financial literacy. This is why we offer a full range of financial literacy resources along with the services we provide.
I particularly dislike the implication, here, that PIN-based transactions are unsafe. They’re not; they’re just less lucrative, in terms of interchange fees, than signature-based transactions.
"Two Large Cod and a Chainsaw.” If that sounds like a Monty Python still life, then welcome to the slightly surreal world of Episode 5, which featured, among other oddities, bodies swinging over a fjord, fish dragged up a hill, a medieval knight straight out of “The Seventh Seal” and, for good measure, a decapitated farm animal.
This last item formed a kind of Satan’s Passover for doctor Kat, whose attempts to eat a sheep’s head (as part of what the Land of the Midnight Sun likes to call “a traditional Christmas ritual”) ran up against three serious obstacles. 1) Kat hasn’t eaten meat in 22 years. 2) Her meal was staring at her the entire time. 3) The ghost of Bernard Herrmann was cranking up the accompanying music to “Psycho”-like distress levels. But Kat stayed cool. “Crunchy romaine lettuce,” she murmured in a trance of denial. “Calamari. Cucumbers.” Until at last she hit on the winning formula: “It tastes like money!”
Or at least victory. By dint of their gustatory valor, Kat and fellow doc Nat vaulted straight to the finish line, where presumably some vomit bucket was waiting just offscreen. Not so lucky were the beach-volleyball Amazons, who were eliminated just as I was beginning to tell them apart. While undeniably lovely, Katie and Rachel have remained stubbornly undeveloped as characters, and in this final outing they were reduced to uttering Lombardi-isms like “We don’t lose” and “This is not ‘Amazing Friend,’ it’s ‘Amazing Race,’ ” which served to only underscore how amazingly far behind they were.
You won’t find this, probably, in any contestant briefing, but “The Amazing Race” is really two races: one for bucks, one for hearts and minds. And it’s the latter competition that is most definitely heating up. Michael’s nutcracker mouth and fractured English grow more winning with each passing week. (When informed that one challenge would require “strength, stamina and guts,” he proudly cackled: “I don’t have none!”) Brook, with her verve and gumption, has accomplished the extraordinary feat of making me revisit my feelings about the Home Shopping Network. I didn’t even mind when she invoked dead relations to get Claire up that rope of doom. “Pray to your grandma!” shouted Brook. “She’ll get you through this. Just think of your grandma and how strong she was. She’d be encouraging you the whole way.” Personally, I think Grandma would be saying, “Why the hell are you dangling hundreds of feet over a Norwegian fjord?” but then again, the only thing my grandmother ever got dirty was her martini.
And now, please, a moment of celebration for Vicki the Tattooed Lady, who is quietly exposing boyfriend Nick for the sack of bluster he is. Despite “riding dirt bikes competitively” since he was 12, Nick was left gasping in Vicki’s wake as she pedaled toward the next clue. And this was just after she’d hoisted herself up and down a rappelling line with nary a whine or grimace. As Vicki herself explained: “I’m the one who has the guts in this relationship.” Testify, sister. And if you ever end up in a women’s penitentiary — as occasionally seems possible — the queenship of Cell Block H is yours for the taking.
— Louis Bayard
Photo: Nat and Kat faced with the Norwegian delicacy of a sheep's head. Credit: CBS.
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This was probably inevitable: the minute that Dodd-Frank cracked down on the fees charged by credit cards aimed at students, some other bright financial innovation would crop up. This time, a debit card aimed at students. Which carries lots of fees. Ylan Mui reports that a company called Higher One has started signing up colleges around the country, taking on the burden of providing cash to students. In return, it gets lots of fees:
Students say several of the fees associated with Higher One’s card are particularly irksome, including the $19 inactivity fee, a 50-cent charge for using a PIN to make a purchase rather than a signature, and a $2.50 fee for using other banks’ ATMs…
Higher One said that only 1 percent of customers have been charged an inactivity fee and that more than half are charged the 50-cent fee only once. All fees are listed on Higher One’s Web site, along with tips on avoiding them.
“We have a big effort with educating students on how to use the account,” Smith said. “We’re very passionate about financial literacy.”
If the fees are listed on Higher One’s website, they’re not exactly prominent. I did find this page, eventually, via this blog entry, but it just says that “when you swipe & sign, you won’t be charged the PIN-based transaction fee”. I haven’t been able to find a page showing a 50-cent transaction fee anywhere*, although I did manage to find this page, showing a $25 fee for domestic wire transfers and a $50 fee for international wire transfers. “Higher One offers less costly alternatives for transferring funds”, it says, without giving any indication what they might be; I suspect that what they’re talking about is transfers to or from people who have already registered somehow with Higher One.
It should go without saying that any firm which is “very passionate about financial literacy” would encourage, rather than penalize, simple, cheap and safe PIN-debit transactions. It would not give students a debit card and then tell them that if they want to avoid fees they should select the “credit” option rather than the “debit” option when they come to pay.
And I can’t think of any good reason to charge a $19 inactivity fee to people who haven’t used their cards in 9 months.
The fact is that students are often very naive when it comes to money, and it’s easy to gouge them once or twice before they learn that banks are not necessarily on their side. If you can get your card accepted by a majority of freshmen every year, and then come up with all manner of weird fees to hit them with, that’s a great way of making money out of ignorance.
Meanwhile, all students should have a bank account: giving them a debit card instead only serves to maximize the number of unbanked students. So while I’m sure cards like this are attractive to colleges, it would be great if either the colleges or else the Consumer Financial Protection Bureau started being a lot more critical of them. Prepaid cards only ever make sense if the alternative is being completely unbanked; that should not ever be the case for students.
*At Southern Oregon University, Higher One agreed to waive the 50-cent PIN-debit charge, but only if there was a simultaneous “swipe-and-sign” campaign. If the campaign is unsuccessful and students do the sensible thing by using PIN debit, then the university can be charged $2 per student for “PIN fee elimination”.
Update: Higher One’s Donald Smith responds:
Higher One was founded 10 years ago by three college students (undergraduates at the time) who were looking for streamlining the way financial aid refunds were distributed to students. Today we work with more than 675 campuses across the country, have a 97% client retention rating, and an A+ rating with the BBB.
The OneAccount is Higher One’s optional, no minimum balance, no monthly fee, FDIC-Insured checking account created by students for students. We do not offer a stored value card. We are very open with our fee schedule. We post it on every program website for all to access, explain each fee, discuss how to avoid each fee, and provide students with a web page that tells them how to use the account for free (which you’ve already found). Because of this, we believe that our customers pay less than half the amount in fees that the average bank checking account customer pays per year.
Two of the fees you referenced in your blog are the PIN fee and the Abandoned Account Fee. The PIN fee is easily avoided by choosing a signature based transaction at the checkout. The majority of students uses it in this manner and is in turn protected by MasterCard’s Zero Liability Policy against fraudulent charges (a safer way of purchasing than a PIN based transaction). We do not have an inactivity fee on our fee schedule – we don’t penalize students who do not use their accounts. We do have an Abandoned Account Fee of up to $19, for those who have abandoned their accounts, but this has been charged to less than 1% of all OneAccount holders in our company’s history because of our proactive outreach plan.
Higher One offers no instruments of credit. As a matter of fact, we’re generally in favor of initiatives restricting students’ access to credit cards and promoting financial literacy. This is why we offer a full range of financial literacy resources along with the services we provide.
I particularly dislike the implication, here, that PIN-based transactions are unsafe. They’re not; they’re just less lucrative, in terms of interchange fees, than signature-based transactions.
"Two Large Cod and a Chainsaw.” If that sounds like a Monty Python still life, then welcome to the slightly surreal world of Episode 5, which featured, among other oddities, bodies swinging over a fjord, fish dragged up a hill, a medieval knight straight out of “The Seventh Seal” and, for good measure, a decapitated farm animal.
This last item formed a kind of Satan’s Passover for doctor Kat, whose attempts to eat a sheep’s head (as part of what the Land of the Midnight Sun likes to call “a traditional Christmas ritual”) ran up against three serious obstacles. 1) Kat hasn’t eaten meat in 22 years. 2) Her meal was staring at her the entire time. 3) The ghost of Bernard Herrmann was cranking up the accompanying music to “Psycho”-like distress levels. But Kat stayed cool. “Crunchy romaine lettuce,” she murmured in a trance of denial. “Calamari. Cucumbers.” Until at last she hit on the winning formula: “It tastes like money!”
Or at least victory. By dint of their gustatory valor, Kat and fellow doc Nat vaulted straight to the finish line, where presumably some vomit bucket was waiting just offscreen. Not so lucky were the beach-volleyball Amazons, who were eliminated just as I was beginning to tell them apart. While undeniably lovely, Katie and Rachel have remained stubbornly undeveloped as characters, and in this final outing they were reduced to uttering Lombardi-isms like “We don’t lose” and “This is not ‘Amazing Friend,’ it’s ‘Amazing Race,’ ” which served to only underscore how amazingly far behind they were.
You won’t find this, probably, in any contestant briefing, but “The Amazing Race” is really two races: one for bucks, one for hearts and minds. And it’s the latter competition that is most definitely heating up. Michael’s nutcracker mouth and fractured English grow more winning with each passing week. (When informed that one challenge would require “strength, stamina and guts,” he proudly cackled: “I don’t have none!”) Brook, with her verve and gumption, has accomplished the extraordinary feat of making me revisit my feelings about the Home Shopping Network. I didn’t even mind when she invoked dead relations to get Claire up that rope of doom. “Pray to your grandma!” shouted Brook. “She’ll get you through this. Just think of your grandma and how strong she was. She’d be encouraging you the whole way.” Personally, I think Grandma would be saying, “Why the hell are you dangling hundreds of feet over a Norwegian fjord?” but then again, the only thing my grandmother ever got dirty was her martini.
And now, please, a moment of celebration for Vicki the Tattooed Lady, who is quietly exposing boyfriend Nick for the sack of bluster he is. Despite “riding dirt bikes competitively” since he was 12, Nick was left gasping in Vicki’s wake as she pedaled toward the next clue. And this was just after she’d hoisted herself up and down a rappelling line with nary a whine or grimace. As Vicki herself explained: “I’m the one who has the guts in this relationship.” Testify, sister. And if you ever end up in a women’s penitentiary — as occasionally seems possible — the queenship of Cell Block H is yours for the taking.
— Louis Bayard
Photo: Nat and Kat faced with the Norwegian delicacy of a sheep's head. Credit: CBS.
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