Which is Best for College: Prepaid Debit Card or Bank Account

College is an important time to learn about managing finances, if you haven't already started.

How you handle your money will be greatly affected by what method you use to access your money.

The traditional method is to open a checking account at a bank, which will come with a debit card that can be used to swipe for purchases and withdraw cash from ATMs.

An alternative worth exploring is the lesser known but burgeoning market of prepaid debit cards.

What Are Prepaid Cards?

A prepaid debit card is similar to a regular debit card in that you can pay for purchases and withdraw from ATMs, but the difference is that it's not connected to a bank account.

In that way, it can be thought of as a reloadable gift card, though there are different fees and perks included.

Prepaid debit cards are accepted at the same places as traditional debit cards and can be used until the balance runs out.

You can put more money onto the card at any time; different companies have different methods of reloading prepaid debit cards.

Banks will naturally allow you to use their ATMs, while other companies partner with convenience stores so you can refill at your corner store.

Many also can be linked with direct deposit.

Fees Involved With Prepaid Cards

Though they're useful for learning to budget, prepaid debit cards come with strings attached.

They commonly have an activation fee, monthly fee and/or ATM withdrawal fee.

These small costs can add up, but like other debit and credit cards, there are benefits that could make the prepaid debit card worth using.

For example, they are easy to acquire and don't require a credit check.

In addition, some prepaid debit cards offer free credit scores, unlimited purchase transactions, online bill payment/check writing and direct deposit.

Many also eschew overdraft fees and provide card-to-card transfers, as well as online budgeting. 

The market for prepaid debit cards is growing rapidly, and companies are taking these cards seriously, loading them with incentives for customers.

Building Credit

Like a traditional debit card, a prepaid debit card will not help build your credit score.

You spend whatever money you already put on the card, and there is no credit involved in the process.

Choosing "credit" as a means of payment when using your debit card just means it goes through that merchant's payment network (e.g., Visa).

A prepaid debit card can be a safer and easier alternative to traditional banking for college students.

Parents can exert more control over the student's spending, but the lack of independence can be a detriment as well.

Both prepaid and traditional debit cards come with fees, so it's important to do adequate research on each option.

We recommend prepaid debit cards for college students who might not have a checking account, as an option.

How to Handle College Student Finances

College is expensive enough that you should do everything possible to limit the costs you can accrue through your own spending.

As a freshman, you don’t want to start your future at a deficit through overspending, credit card swiping, and lack of saving.

We’ve covered the first five ways that you can handle your college student finances to beat future debt. Here are five more helpful financial tips for freshmen:

1. Don’t Use All Your Student Loans if You Don’t Need To

First of all, do you need student loans?  Student debt is no joke and if you can avoid it, do so.

Earning a bachelor’s degree isn’t cheap, but there are ways you can cut the costs of college down without having to take out an egregious amount of loans.

You can go to community school for a few years before transferring, choose a cheaper school versus a name one, apply for scholarships, or work while in college.

If you must take out student loans, don’t assume that you have to use every single penny you receive.

If you need the full amount to cover tuition, well, that’s another matter.

But if you don’t need the full amount you’re offered, don’t accept all of it. Don’t take more than you need.

How much student aid will you need?

To begin, figure out your budget, which is one of the first things you should do on your financial checklist as a freshman.

Be sure to include your tuition, room and board, and estimate the costs of things like books and personal items.

Subtract any funding you might get from a scholarship or grants. The amount that’s left is what you should borrow.

Don’t take more than you need because you’ll be paying it all back once you graduate -- plus interest.

If you need help budgeting, sit down with your parent or elder and figure it out.

Take advantage of websites like Mint to help you track your money.

2. Avoid Unnecessary Costs and Fees

Figuring out your budget when you begin college will help you make wise money decisions, but it would be foolish to think that you’ve accounted for every single expense.

Some hidden costs of college you should keep in mind: supplies you’ll need to complete a class project, materials you might need for any specialty classes (music and art come to mind), late-night snacks you’ll want to purchase when the munchies hit, fees to join and participate in student organizations, printing and copying fees, and the alcohol you’ll probably buy in your later years.

That's not an exhaustive list, by the way.

The point is, there are costs that you will have to absorb during college that you probably aren’t even aware of -- and you need to have money saved to pay for these things.

In addition to the hidden costs of attending college, if you’ve got a credit card, there are fees you should be aware of, too.

Because this might be the first time you have a credit card on you own, watch out!

Credit card issuers will nickel and dime you for everything they can.

Some fees to avoid include getting added payment protection, having paper statements sent to you, inactivity fees, and reward fees.

There are many other fees not listed here that you should avoid.

Best thing to do if you have a credit card: pay it on time, pay attention to changes in your terms, and pay with cash if you have it!

3. Take Advantage of Technology, But Don’t Let it Take Advantage of You

Incoming freshmen have grown up during the digital era and are more web-savvy than previous generations.

Nowadays there are tons of apps and websites that can help college freshmen stay both physically and financially fit. Take advantage of them!

Whether you choose to manage your money with Mint, Checkbook, BillGuard, or Spending Tracker -- keeping track of your finances has never been easier.

Plus, you can easily access these apps on your iPhone or iPad, so there’s no excuse for not budgeting and tracking your expenses.

That said, as wonderful as technology is, it can also have a negative impact on your finances.

Identity theft is a multibillion dollar industry. And while it’s likely you’re tech savvy, it’s easy to let your guard down in college.

You might have roommates roaming around your dorm.

You could visit a less-than-reputable website and catch a computer virus.

Or maybe you accidentally leave important documents lying around.

Whatever the case, as a freshman, you’ll be having fun, making friends, and documenting it all on social media.

You need to protect yourself or you could end up a victim of identity theft.

Here are a few tips to help you stay safe: Don’t tell anyone your passwords, change them from time to time, be sure to log out from any computer you use on campus, keep important documents like your bank account statements safe, opt for paperless statements, check for any dubious charges online at your bank’s website or on their app, and be careful when you withdraw money or use your debit card.

4. Use Your School Resources

Oftentimes, first-year students don’t take full advantage of the resources offered on campus.

Sure, you’ll eat at the cafeteria, use the gym, and maybe study in the library. But there are tons of other resources available to you.

And guess what?

Your tuition money is paying for them!

So use your school’s resource or career center to find job or internship opportunities.

Use any of the support services provided at your college. Also, meet with professors, enroll in clubs and organizations, and get involved.

In addition to taking advantage of the resources your school has, you should also utilize the benefits you get as a student.

Some retail stores in your community might offer discounts because you’re a college student.

The movie theater should offer a student discount.

Some restaurants might even offer you deals if you’re attending school in a college town.

Check to see what benefits your student ID has.

Your school should have these listed somewhere. If not, ask upperclassmen or dorm supervisor for advice.

5. Invest in Yourself

College is a time to explore, fail, and get back up and try again. Investing in yourself involves more than just attending classes everyday.

You need to network and build relationships with people who might be able to help you in your chosen field.

Be an active participant in activities and organizations on campus.

Your freshmen year is a time to explore, discover what you like, figure out your interests, and become the person you are meant to be.

The way you can grow is by getting involved.

There are so many opportunities for you to do that on a college campus.

You just have to find the right club, organization, or group for you.

Investing in yourself also means being responsible with your money.

Even if you opt to not get a job your freshman year, you should look for work at some point during your time at college, even if it’s just during summer.

The money you earn will likely go to expenses you incur during college, but it’s not a bad idea to get into the habit of saving.

Even placing a mere $25 in a high-yield savings account now will pay off -- albeit years from now.

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