Fee Transparency: Will We Know It When We See It?
The recent surge of anti-banking sentiment is clearing the way for a new age of banking where institutions must become transparent. But transparency has its burdens, too. Companies that hit the transparency mark leave themselves vulnerable to more criticism because the fees are simply easier for users to access. Are we distinguishing between the banking giants and the bank around the corner? The national, one-size-fits-all and the niche banks that serve a specific group?
One such company, Higher One, designed its services specifically around the needs of college students — and transparency was a theme from the beginning — challenging users to find other fee schedules faster than theirs. Higher One isn’t a big bank, it’s a small company offering checking accounts to students receiving financial aid through its banking partner. Although student angst swelled with the national rise in financial stress, and some complaints about Higher One were publicized, students overall don’t have complaints about their Higher One account. It received an A+ rating from the Better Business Bureau and millions of students use it.
“As the biggest U.S. banks backed down from recent fee increases due to public pressures, fees will likely increase in other, less transparent ways. For students, the OneAccount still proves a good deal,” says Michael Flores, CEO of Bretton Woods — a financial services firm that analyzed available options for students to access their financial aid refunds. “They are offered reliable choices with a secure, low-cost, straightforward banking experience.”
Flores’ thorough comparison of student banking options measures how Higher One’s primary checking account, the OneAccount, actually stacks up against bank offerings. Flores says Higher One doesn’t just believe in fee transparency, its FDIC-insured checking account is based on it. For college students, his research says the four biggest national banks can have an average annual cost of $129. By comparison, according to Flores, the OneAccount costs an average of $45 annually. Flores says to look at the big picture — the annual cost, not to focus on just one fee.
The OneAccount is a full-service account designed for the average college student with no minimum balance, no monthly fees and no credit check — which helps many students considered “unbankable” because of their financial history. Since student life revolves around campus activity, the OneAccount is linked to a Debit MasterCard that can be used for free to get cash at Higher One ATMs located on campus or swiped anywhere else MasterCard is accepted.
The account offers direct deposit and other features often reserved for more premium-level accounts (mobile banking alerts and mobile deposit features revolve around actual patterns of usage by students). There are a few fees related to the checking account, but the fees are completely transparent and are not much different from national or regional banks. In fact, students receive instruction on how to avoid fees, a topic they’re educated about upfront through on-campus signage and literature, email campaigns, videos and the account website.
Fees that Higher One emphasizes in its educational materials include a PIN fee and a foreign ATM fee. By selecting “credit,” not “debit,” when you swipe for purchases, users avoid a $0.50 PIN fee and can protect themselves from fraud. The other fee is the same foreign ATM fee charged by nearly every bank. Students at Wayne State University attest to Higher One’s simple fee structure.
Across the country, James Garcia, a student and OneAccount holder at East Los Angeles College, says, “To this day, I don’t think I’ve ever had to pay a fee. Even though I have another checking account, I use my OneAccount all over because it’s just convenient.”