Think college students are a pack of impetuous, fad-driven consumers eager to trust their assets to innovative banking technology products? Well, think again.A U.S. Banker survey of 26 college students from across the nation indicates that college students tend to be as cautious and skeptical about banking products and new delivery systems as their parents.
So much, then, for the "point-and-click" generation.
Only five out of the 26 said they use the Internet for banking purposes, whether to check their balances, transfer funds or pay bills. Out of the remaining 21 students, seven didn't even know if their banks offered online services, and nine admitted being uncomfortable with the idea.
Amy Peterson, a senior at Rocky Mountain College in Billings, MT, is so worried about the security of Internet banking that she's willing to forego its potential convenience. Her opinion was shared by many, such as Jason Weiner, a recent graduate of Marymount Manhattan College in New York. "The concept of paying bills online is a little scary," says Weiner. "I'd always worry about something crashing."
Students seem just as uncomfortable about the lack of personal contact as older generations have been. "I have never considered banking online and am not considering it," says Mary Slonina, a junior at the College of William and Mary in Williamsburg, VA. She says that she has never even checked her balance over the Internet. "With something like my bank account, I prefer to physically go to the bank."
In fact, students' desire for personal contact extends beyond the realm of Internet banking. Many students aren't willing to deposit money in an ATM because they feel more secure having a teller inside the bank handle their money.
Only 10 of the 26 students interviewed use ATMs to make deposits. Nine of the remaining 16 were unwilling to trust their money to an ATM and said they always go into their banks to make deposits. "If I get a paycheck, I don't want to put it in a little slot that sucks it up," says Charles Brown, a senior at Indiana University in Bloomington, IN. "I don't trust the machine."
Matt Carulli, a senior at the University of Toledo in Toledo, OH, shares the same reservations. "I don't think it's safe," he says. "I'm very skeptical about ATMs. I like dealing with people, not machines."
But students don't like dealing with tellers if there's a price. "It's stupid that they charge us to use a teller," says Erin Hart, a junior at Grinnell College in Grinnell, IA. Hart has been charged $2 by Fleet Bank for every teller transaction that she could have performed electronically. While at school in Iowa, 1,000 miles from her branch in Amesbury, MA, she appreciates the convenience of the ATM for withdrawals. But at home in Massachusetts over the summer, Hart says the fee for a teller is irritating. "I would rather have the option of using a teller in addition to an ATM," she says. If Fleet's policy is to create loyal, long-term customers, the amount it earns charging students like Hart for using a teller very well might undermine the ultimate goal.
Jim Schepker, a Fleet spokesman, said the $2 "staff-assist fee" on the Student Self-Service Checking account was introduced principally to match the features of Fleet's more broad-based Self-Service Checking account. The fee was developed to keep customers who pay reduced monthly fees from using high-expense services, such as cashing checks at the teller window.
Schepker said students had been encouraged to use tellers for any transaction that wasn't a withdrawal, deposit or balance inquiry. However, surveys and focus groups demonstrated that the rules governing the fee created such confusion and uncertainty that students had become afraid to enter the branch for any reason. As a result, the bank eliminated the charges this summer.
Some students appear to be devoted to old-fashioned, homespun bankers. One example is Tyler Mann, a junior at Yale University in New Haven, CT. He still uses his hometown Regions Bank in Roswell, GA. Mann must pay an ATM fee each time he withdraws money in New Haven, and each time he wants to make a deposit he has to send a check through the mail to Georgia. He describes the process and the cost as "a pain," but claims he feels far more comfortable dealing with people he knows at his hometown bank. "I never wanted to deal with a huge bank," he says.
Similarly, Amy Peterson, the Rocky Mountain College student, still uses Glendive Public Employees Federal Credit Union, located in her hometown of Glendive, MT, some 200 miles from school in Billings. Peterson has no ATM card, so when she needs money she cashes checks at the school business office. And when she has funds to deposit, she sends a check through the mail or gives money to deposit in the credit union to her parents when they visit. "It's not the most convenient option, but it's the one I feel safest with," she says. "Glendive is a small town, so they know me personally at the credit union. Being a college student paying for school, it's nice to have that security."
Of course, not every college student manages money conservatively. A recent graduate of the University of Maryland, who asked that his name not be used, received a Citibank Visa Gold credit card from his father at the beginning of freshman year. The card's initial credit limit was $8,000, because his father had backed it. But all the bills went directly to "Joe College," whose father thought it would be a good way for his son to learn how to manage money. Big mistake.
Joe put all his expenses on the credit card. His credit was good because he always made the minimum payment, so he applied for and received additional cards from First USA and Bank of America. After his first two years at school, Joe wound up $12,000 in debt.
To pay it all off, Joe got a job during his junior year and worked 50 hours a week while trying to complete 18 credits a semester. In addition to his regular job, Joe also resorted to dealing drugs and taking bets as a bookie. He never told his parents how deeply in debt he was. "I knew what I was doing, I knew it wasn't smart, but I wanted to keep charging," says Joe. "I was looking to have a good time like everyone else who charged things on their parents' credit cards. It was my choice to be stupid, I just never realized it was going to add up to that much."
Among those interviewed by U.S. Banker, Joe was an exception, but credit cards present a constant temptation to most college students. And credit card companies hard-pressed to get new customers command a strong presence on campuses across the country. Students are constantly barraged with mailings and phone calls. And several times a year, usually at the beginning of a semester, credit card representatives set up tables in the center of campus, enticing students to sign up for a card by giving away free gifts. "They give you free everything to get you to fill out those forms," says Joshua Jacobs, a junior at Rutgers College in New Brunswick, NJ. "Shirts, phone cards, food you name it."
Brian Dalphon, director of investor relations at MBNA, one of the biggest college credit card lenders in the country, claims that MBNA approves fewer student applications than it declines and is intent on making sure that students know how to handle their credit responsibly. Yet Ed Mierzwinski, consumer program director of the U.S. Public Interest Research Group (PIRG), described credit card marketing on campuses as "disgraceful." For college students to qualify for a credit card, "all they have to do is be breathing," Mierzwinski says. "It's just not right."
Most of the students who participated in U.S. Banker's survey are extremely wary of credit cards. About half of the interviewed students, 14 out of 26, reported having their own credit cards. And nine out of those 14 said they use their cards as sparingly as possible because they want to avoid getting into debt. "I don't want a credit card because I'm afraid of how much I would spend," says Amy Sweetnam, a junior at California Polytechnic State University in San Luis Obispo, CA.
"I don't want to get stuck with extra things to pay for before having an income," says Grinnell College student Hart. "I want to stick within my own little financial boundaries."
Debit cards, rather than credit cards, are the preferred method of payment among the students interviewed. Twenty-one out of 26 students own debit cards, and 17 out of those 21 use them on a regular basis. In fact, debit cards present such an attractive alternative that many students use them more often than cash.
"I charge everything on my debit card," says Matthew Cox, a junior at Pasadena City College in Pasadena, CA. "I don't like carrying cash and I never need to. The card does everything."
Most students report using debit cards instead of credit cards to avoid racking up debt. Amelia Stephens, a junior at Washington University in St. Louis, MO, says, "It makes it easier when I know the money's coming straight out of my account. I know I can't spend more than I have."
Some students were even more vehement about avoiding credit cards. "Even though people tell me it's impossible, one of my goals in life is to never have a credit card," says Tyler Mann, the Yale University student. Mann explains that he hates owing anyone money. And his convictions were further strengthened by watching his older brother juggle student loans and five different credit card bills every month.
Many students are burdened with back-breaking student loans, so avoiding debt in any form is logically on the forefront of their minds. "It's something that I think about," says Jenna Ronnquist, a sophomore at Whitworth College in Spokane, WA. "I don't want to get out of school in debt." Yet according to the spring 2001 financial services survey put out by Student Monitor, a nationally syndicated research company that focuses exclusively on the college student market, 44% of students finish their college years in debt from student loans. The study also puts the average loan at $20,756, and estimates that it takes approximately seven years for graduates to pay off the costs of their education.
College students are their own unique category of consumers, and banks are anxious to harness this segment of the population. According to Eric Weil, one of the founding partners of Student Monitor, many national banks go so far as to have separate marketing departments that specifically target college students. As older consumer age-groups have hesitated to embrace banking technology, banks have been licking their chops in anticipation of a generation of college students that will devour the high-tech products collecting dust in the financial marketplace. But banks are barking up the wrong tree.
This informal survey demonstrates that students are capable of being just as cautious and traditional in their banking habits as the generations before them. Certainly there are plenty of students who are taken in by financial gadgets and gimmicks, both new and old. But college students are not the impulsive, voracious consumers that banks have taken for granted.