Marc their money. This gives students the incentive

Marc Petruccelli

Mr. Kimbal

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Blog Post 1


Free choice in limited banks?


            Colleges and universities have found
a very effective way of creating revenue to the school. In recent years’ state
funding for universities and education has slowly declined. In a report
authored by the United States Public Interest Group Education Fund they “found
that nearly 900 colleges and universities have card partnerships with financial
institutions; in some instances, the colleges receive hefty payments from banks
for their exclusive access to students”. This gives banks the ability to
advertise all over the university’s campus by setting up tents and advertising special
deals for students who sign up with them. Some of these deals are free food,
free clothing, or even lower to no fees for signing up right there. Universities
make large royalties off allowing the bank to basically be a sponsorship of the
university. Credit cards and student cards come with the logo of the university
as well as using student cards as a direct access to their money. This gives
students the incentive to use the bank in which their university is offering,
essentially making students believe the bank is trusted by the university.

Students then believe that this bank is the best option available but is the
only option that is somewhat convenient for them. This essentially outsources
all other banks from being able to connect with students and allowing them to
use their banking system. A study done by the Wall Street Journal “found that
112 colleges around the U.S. received nearly $18.7 million in fiscal 2017 from
banks for consumer finance deals. Much of that is in the form of royalties”. Payments
vary from institution to institution, “Holy Family University in Pennsylvania received
$2,000 from PNC and at the top, University of California, Berkeley, received roughly
$1.7 million under its contract with Bank of the West”. The Wall Street Journal
concluded that public and community colleges pay the highest fees in 2017, on average
$70 a year for overdrafts. At larger universities fees were found to be a lot lower
with at an average rate of $30. The Journal reviewed 30 of the highest average
fees and found out “Twenty-two of the 30 highest average fees were schools with
Wells Fargo contracts” Of the 30 lowest, twenty were with universities that had
contracts with PNC. Nick Certo president of PNC’s university banking system
said “The bank is investing in potential customers and their communities and he
added schools are looking for funding”. Schools such as the University of
Illinois “receives $936,00 in annual royalty payments from PNC and can earn another
$200 per account if more than 4,680 new accounts are opened in each year”. This
gives banks the incentive to allow advertising on campus to allow more students
to be able to open an account. The more students that open accounts, the more
money the university can make. Experts say the presence of these banks co-branded
with the university gives students the incentive or idea that the bank offered
through the school is the best option. The education Department monitors the
universities and make sure the accounts the advertise are: not inconsistent with
the best financial interests of the students opening them, including reasonable
due diligence in which every two years they review whether fees are in line
with market rates, given they aren’t required to share those comparisons with
students”. In recent years, the government has tightened regulations on banks
co-branding with universities in attempt to help students choose banking
systems more freely. This should come to students that they should be more diligent
in choosing their banking system for the school advertises their preference of
bank solely because they will make revenue from it.



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