Credit cards, cash machines & checking accounts: No such thing as free money for college students

College opens up a whole new world to teens -- more freedom, more responsibilities, more access to their finances.

From the balancing of class schedules to the balancing of a checking account, it's all part of daily life for college students.

Patsy Kalkowski, a retail banker at Home Federal, said she talks to teens when they open bank accounts and gives them financial tips to help avoid costly mistakes.

In years past, it was more common for students who had just graduated from high school to come into the bank with their parents and open accounts for their graduation money. However, it is getting more and more common for high school students to have accounts, especially if they have jobs, she said.

There are even ATMs at Grand Island Senior High and Northwest High School, she said.

"I'm surprised by how many kids have debit cards in high school," she said.

Kalkowski stressed the importance of keeping healthy finances because mistakes today can hurt a person's credit and that person's standing with his or her bank.

Anyone with a bank account needs to keep track of his or her transactions and of the amount of money in the account. However, first-time account holders, especially college students experiencing the freedoms of being away from home, need to be mindful of where and how they are spending their money.

It is important to track receipts, particularly with debit card purchases, to avoid overdraft charges, she said.

Overdrafts can result in costly fees. For example, buying a $5 slice of pizza with a debit card on an overdrawn account can lead to a $25 overdraft fee.

"So that $5 piece of pizza will cost $30," Kalkowski said. "Most people wouldn't walk up to a counter and pay $30 for a slice of pizza."

Being aware of fees for using a "foreign" ATM is also important. Withdrawals from ATMs not associated with the cardholder's bank can result in a $2-per-transaction fee, she said.

There are other considerations to be made with debit cards, as well. Such as when one is used to pay for fuel at a gas pump, $50 is often pulled from the account, even if the purchase amount is lower. The difference is eventually returned to the account but can leave a person temporarily overdrawn, she said.

Online banking and joint accounts can make it easier for parents to help their teens keep track of finances and transfer money quickly if necessary, she said. Having a parent's name on the account also means the parent will have a card, with the bank's phone number printed on the back, in case the student loses his or her card, Kalkowski said.

Anytime a card is lost or believed stolen, it is important to call the bank so a new card, with a new number, can be issued. Also, if a card holder thinks his or her PIN number has been compromised, the card holder can stop into any branch of his or her bank and have the number changed for free, Kalkowski said.

"Keep track of your card," she said. "If you think it is missing, call your bank immediately. (A thief) can go through your money pretty fast."

Craig Ratzlaff, an instructor at Central Community College in Grand Island, teaches a course on the basics of money management.

In the class, he teaches students how to spend, helps them set goals and addresses budgeting. The hands-on approach includes tracking spending and setting up budgets, he said.

"Many of the students don't know where their money goes," he said. "They start monitoring it and see how many times they eat out, and they say, ’I can't believe I did that.'"

In addition, Ratzlaff teaches the students -- who include people who have very little financial experience to those who've gotten into trouble -- about savings accounts, large purchases, insurance and credit cards.

"We talk about the good, the bad and the ugly with that," he said of credit cards.

He points out the fine print in credit card contracts and discusses fees, grace periods and annual percentage rates with his students. They use a booklet that shows the amount of time it takes to pay off credit card debt by paying the minimum monthly balance. For example, it will take a person paying the $10 minimum on $8,000 in credit card debt with 12 percent interest 16 years to achieve a zero balance, he said.

"That surprised even me," he said.

Each student also looks at his or her credit report, which can be a real eye-opener, he said. Some of the students don't have anything on their report, while others have long-forgotten accounts that they opened to save money on a same-day purchase, he said.

When students head off to college, they get "tons" of credit card applications, Kalkowski said.

"It's best to shred those," she said.

Then there are those tables in the student union where friendly salespeople promise a free T-shirt or water bottle just for applying for a credit card.

"If a student is interested in getting a credit card, they should talk to their parents first," Kalkowski said. "Don't sign anything until you talk to your parents."

To help avoid overwhelming credit card debit, parents can request that a card have a limit, such as $300, she said.

Credit card abuse can show up on a person's credit history and can stay there for seven to 10 years, which could be an issue when it comes to getting a loan, she said.

Many colleges today, including the University of Nebraska-Lincoln, allow for a student's identification card to be used as a credit card on campus. Doing so requires the same diligence as a regular credit card, Kalkowski said.

"Be careful and keep track of your finances," she said.

That can be an especially good tip when making purchases online. Kalkowski said it's important only to make online purchases on reputable Web sites and to be careful not to unwittingly make purchases while "messing around."