Campus convenience proves costly; banks' school-based partnerships are lucrative, but students end

SAN FRANCISCO -- In his two years at Iowa State University, junior Abe Hunter has spent more than $500 on ATM fees.

Hunter has an account back home with Ameriprise Financial, formerly a branch of American Express Co., because of his family's past affiliation with that company. But U.S. Bank's prime branch and ATM location a block away from campus and exclusive debit-card partnership with the school's ID program means Hunter gets most of his cash from U.S. Bank's machines.

To minimize the hit from those ATMs' non-member fees --  they run anywhere from $1.50 to $5 depending on the machine -- Hunter has memorized which ATMs charge the lowest rate of $1.50.

"I try not to think about it," he says, referring to shelling out hundreds of dollars in fees for his four-times-a-week ATM habit.

Whether it's overdoing it on loans or mismanaging money, college students often struggle financially. And rather than helping them by giving one bank priority access to campus and thereby students' money, many schools are enriching themselves far more than their tuition-paying customers: While most colleges pocket between $10,000 and $20,000 a year for that exclusive bank use, some schools earn up to $200,000, according to school administrators at some public schools.

Two-thirds of the nation's largest 15 universities either partner with banks to promote debit cards or are looking to do so, according to a survey earlier this year.

U.S. Bank, a subsidiary of US Bancorp, has partnerships with about 40 colleges nationwide, including offering student identification cards that also work as debit cards. Bank of America, its closest college-banking competitor, has about 700 relationships with alumni groups or athletic departments but focuses on college affinity credit-card accounts as opposed to exclusive on-campus branches or ID cards, said Diane Wagner, Bank of America's senior vice president for media relations.

Although U.S. Bank would not release financial information because of confidentiality agreements, administrators at public schools with a partnership with that bank said they are paid either yearly or monthly based on the number of student, faculty or staff accounts, or by square footage of the space U.S. Bank leases.

Iowa State University originally received $10,000 in 1997 when it partnered with U.S. Bank, said Joan Piscitcello, the university's treasurer. And with about 13,000 Iowa State accounts, the school banked $200,000 from U.S. Bank this year.

Northern-Calif.-based Sonoma State University and Northern Kentucky University received about $10,000 when partnerships were forged a few years ago with U.S. Bank; both universities had about 1,500 accounts at the time.

Evanston, Ill.-based Northwestern University offers a fairly typical example of how the process often works on school campuses. About 35 percent, or 3,000, Northwestern students have a U.S. Bank account, said Nick Skipitaris, U.S. Bank's branch manager at the school.

Skipitaris said in June that U.S. Bank worked strategically with Northwestern when its contract was signed in 2004 to ensure the student-center branch and the seven ATMs were no more than two minutes' walking distance from each other.

But Northwestern's financial agreement with U.S. Bank is private, as Brian Peters, director of Northwestern's University Services, wrote in an e-mail in June that "the financial arrangements between NU and any of our preferred vendors is not something that we share with the public. Most of our contracts have confidentiality clauses."

During Northwestern's orientation week, U.S. Bank often gives away thousands of promotions, including free portable speakers in 2006 and computer flash drives last year, to new customers. Whitney Bright, U.S. Bank's vice president and general manager of campus banking, said most schools partnered with U.S. Bank to offer these giveaways, which cost U.S. Bank between $3 and $5 each.

Since Northwestern students' required ID card, or WildCARD, can link to their bank accounts, students often are persuaded to open a U.S. Bank account in the fall of their freshman year, even if they already have another one at a bank in their hometown. Skipitaris estimates he hands out at least 1,500 business cards out of about 2,000 new students_and their parents_that come in hordes to the bank's campus branch.

"I was told 'U.S. Bank: That's the bank you get when you come to NU,'" said incoming Northwestern junior Kristi Infante. "When I got here I thought that's what everyone did."

Infante uses City National Bank for savings when she goes home, but has only a U.S. Bank debit card. The Miami native said her WildCARD is the only credit card in her wallet. "The WildCARD is hooked up, that's your ATM," she said.

But consumer researchers are wary of the necessity of these partnerships since many students arrive at school already owning credit cards or bank accounts.

For many students, adding ATM fees to their other expenses is a nightmare. College students spend about $200 a month on general items, or about $2,400 a year_more than half of their annual personal earnings of about $3,900, according to a recent study by Student Monitor, a college market-research firm, of a representative sample of 1,200 four-year, full-time undergraduates.

Banks target college students, especially with debit cards, credit cards and checking accounts because students use them so often, said Eric Weil, managing partner of Student Monitor.

"We've kind of questioned the whole value of those types of relationships because again you have so many students who are acquiring their card and checking account before they set foot on campus," Weil said.