# You Need to Understand How Interest Impacts Your Student Loan Payments

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If you’re a recent college graduate who has never had any debt besides the student loans you graduated with, you might not fully understand how interest works when it comes to your loans.

How payments are applied can be a little confusing to someone who has never had to deal with it before.

If that’s the case for you, then you should read on, as we’re looking at how payments go toward the interest of your loans first, and explaining how you can reduce the interest you’re paying on your student loans.

This information can save you thousands of dollars over the life of your loan if you apply it correctly.

### How Are Payments Applied to my Loans?

For most student loans, your payment is going to be applied to interest first, and then to principal. If you have any fees associated with your loans (such as a late fee), then your payment will go toward paying your fees first, then interest, and then principal.

If you’re repaying your loans under an Income-Based Repayment Plan, then your payment will be applied to interest first, then fees, and then the principal.

### How Is Interest Calculated?

Interest accrues daily on your student loans, so if you check on your balance a few times throughout the week, you’ll see the amount owed increasing. Student loans use a formula of simplified daily interest, which means interest is only accrued on the principal balance.

Let’s take a look at this in action using an example. Feel free to follow along by plugging in your specific loan numbers.

This is the example we’ll be using: student loan balance of \$8,000 at a 6% interest rate on a 10-year term, with a minimum payment of \$88.82.

#### Forumla 1

To calculate your daily interest amount, use this formula: (Current Principal Balance x Interest Rate) / 365.25

Using our example: (8,000 x .06) / 365.25 = \$1.314168377823409 in interest accrues daily.

#### Forumla 2

If you want the monthly interest amount, use this formula: (Daily Interest Amount x Number of Days in Month)

Using our example: \$1.3141 x 30 = \$39.42 in interest accrues monthly.

#### Forumla 3

Some student loan providers use the “interest rate factor” instead, which is essentially the same thing – the amount of interest that accrues on your loan.

To calculate the interest rate factor, divide the interest rate of your loan by 365.25.

Using our example: .06 / 365.25 = .0001642710472279261.

The formula for the monthly interest rate using the interest rate factor will yield the same results – (Number of Days Since Last Payment) x (Principal Outstanding Balance) x (Interest Rate Factor).

Using our example: 30 x 8,000 x .0001642710472279261= \$39.42 in interest accruing monthly.

#### Takeaway

What you should take away from this is that of your \$88.82 monthly payment, \$39.42 is going toward interest. Ouch!

### What Can I Do To Lower How Much Interest I’m Paying?

Seeing how much of your payments go toward interest can be painful. By paying extra toward your student loans, you can accelerate your debt payoff date and pay less overall.

This is because every time you make a payment over the minimum amount due, more of your payment is applied toward the principal balance. Remember, when the principal balance goes down, the amount of interest accrued does as well.

We know that a 6% interest rate on our \$8,000 loan means \$39.42 of interest accrues monthly. However, 6% interest on a \$6,000 loan is \$29.57. It makes quite a difference!

Let’s take our original example from above. If you simply pay \$88.82 for the entire 10 years, you’ll have your loan paid off on time, but you’ll actually end up paying \$10,657.97. That’s \$2,657.97 more than you signed up for, due to interest!

If you add just \$100 more onto your monthly payment so that you’re paying \$188.82/month, your loan will be paid off in 4 years, and you’ll have saved \$1,619 off your total bill (paying a total of \$9,038.97).

Alternatively, if you can’t afford to pay more in one chunk, you can make extra payments when possible, such as paying \$20/week, every week, toward your loans.

### What Does It Mean When Interest Capitalizes?

It’s important to know what this term means – this is something you only have to be concerned about once, and only if you have unsubsidized loans.

Let’s quickly cover the difference between federally subsidized loans and unsubsidized loans. With federally subsidized loans, the government pays the interest for you while you’re in college. With federally unsubsidized loans, the interest starts accruing as soon as the loan is disbursed to you.

If you don’t make any payments to your unsubsidized loan while you’re in college, then all of the interest accrued while you attended will capitalize when your loan enters repayment status (right after your grace period ends).

If you’re still in college, it’s recommended that you at least try to cover the monthly interest payments while in school. It will save you more money down the road! If you’re in your grace period, there’s no harm in starting to pay early. Take advantage of being able to pay down your interest while you can.

### Look At Your Payment Schedule

Most student loan servicers provide you with a payment schedule so that you can see how your loan will be paid off. This might help you visualize and understand exactly where your payments are going.

If you don’t see an option for this, try using a loan calculator.

### Continue Paying, Even If You’re Paid Ahead

If you do start paying extra toward your student loans, you might notice that the status of your loans says “paid ahead”.

While that means you’re making great progress, it doesn’t mean you need to stop paying your loans. Interest is still accruing! If you take a break and don’t pay, your hard work will be eaten away by interest.

When it comes to paying any loan back, you should be fully aware of the terms of the loan and how it functions. You’re responsible for paying your loans back according to the terms you agreed to.

It’s extremely important to know how your payments are being applied to your student loans. If you have a different type of student loan and aren’t sure how interest is being calculated (or how your payments are being applied) then call your student loan servicer. Many of them have helpful resources on their website that will help you understand how payments are applied, but it’s always worth giving them a call for clarification.

If you only take away two points, let it be these: when you make a payment toward your student loans, your money is going toward the interest on your loan first, and then on the principal. To reduce the amount of interest you pay over the life of your loan, make extra payments when possible.

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Disclaimer

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# Best Student Credit Cards April 2020

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any credit card issuer. This site may be compensated through a credit card issuer partnership.

Getting a credit card while you’re in college can set you up for financial success, provided you avoid racking up unnecessary charges. If you are over 18 and have a steady income, applying for a card now will kick start your credit history, and you can start building that all-important credit score.

Learning how to choose and use the right student credit card is relatively simple. Make sure you avoid annual fees and go with a bank or credit union you can trust. When you get the card, make sure you use it responsibly and pay the balance in full and on time every month. If you do these things consistently over time, you can leave school with an excellent credit score. And if you want to rent an apartment or buy a car, having a good credit score is very important.

## Magnify Glass Pros

• Good Grades Reward program: Did you study extra hard this year? If you’ve gotten a 3.0 GPA or higher for an entire school year, Discover will reward you with an extra \$20 statement credit. You can get this statement credit for up to five years in a row as long as you’re still a current student when you apply.
• 5% cash back: You can earn up to 5% cash back at different places that change each quarter, on up to \$1,500 in purchases every quarter that you activate. Past categories have included things like Amazon purchases, restaurants, and ground transportation. Even if you don’t buy something in the bonus category, you’ll still earn 1% cash back on all other purchases.
• Cash back match at end of your first year: In addition to rotating 5% cash back categories, new cardmembers will also get an intro bonus. When your first card anniversary comes around, Discover will automatically match your cash back rewards you earned during your first year.

## Cons Cons

• Remember to sign up for bonus categories: Even though this card comes with a great cash back rewards program, it comes with a catch: you’ll need to manually activate the bonus places each quarter. You can do this by calling Discover or logging in to your account online. If you forget, you’ll still earn 1% cash back if you make any purchases in the qualifying categories.
• Gift certificates only available at certain levels: You can redeem your rewards for many things such as Amazon purchases, a statement credit, or a donation to a charity, to name a few. But, if you’d like to get a gift card instead, you’ll need a cash back balance of at least \$20 saved up in your account.
Bottom line

### Bottom line

The Discover it® Student Cash Back offers great benefits for college students, such as a rewards program for good grades and a free FICO® score so you can learn about your credit firsthand. Its cash back rewards program is our favorite. No other card for students (that we could find) offers the opportunity to earn up to 5% cash back. And with no annual fee, this is our top pick.

Read our full review of the Discover it® Student Cash Back

## Magnify Glass Pros

• 1.25% cash back if you pay on time: Each purchase you make earns a flat-rate 1% cash back on all purchases; 0.25% cash back bonus on the cash back you earn each month you pay on time. This makes it handy for people who want as simple a card as possible. And it rewards great behavior.
• Higher credit lines after on-time payments: If you’re approved for this card, you’ll receive a credit line of at least \$300. If you make five on-time payments in a row, you can call Capital One and ask them to increase your credit line.
• No foreign transaction fee: This is a great card to take overseas, because you won’t have to pay any foreign transaction fees. Most cards charge an average 3% foreign transaction fee, but Journey allows you to use your card abroad without being charged extra fees.

## Cons Cons

• High APR: This card carries an APR of 26.99% (variable). That’s almost twice as high as some other student credit cards, such as the Wells Fargo Cash Back CollegeSM Card with a rate as low as 12.90% - 22.90% Variable APR. It’s just one more incentive to pay off your bill in full each month.
Bottom line

### Bottom line

We really like this card because it actively rewards you for developing good credit-management behavior by offering a small cash back bonus for on-time payments. In addition, the cash back program is straightforward with no confusing categories to remember or opt into, making this card a good option for students who want a simple, flat-rate card.

Read our full review of the Journey® Student Rewards from Capital One®

## Best Intro Bonus

The information related to Wells Fargo Cash Back CollegeSM Card has been independently collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

### Wells Fargo Cash Back CollegeSM Card

Annual fee
\$0
Rewards Rate
3% cash rewards on gas, grocery, and drugstore purchases for the first 6 months, 1% cash rewards on virtually all other purchases
Regular Purchase APR
12.90% - 22.90% Variable
excellent-credit

## Magnify Glass Pros

• Interest rates as low as 12.90% - 22.90% variable APR: Depending on your credit, your interest rate could be between 12.90% - 22.90% variable APR, but there is no guarantee you’ll receive the lower rate. This is a lower variable APR range than most student cards, and can help if you aren’t able to pay your balance in full one month.
• Intro Rewards Bonus: 3% cash rewards on gas, grocery, and drugstore purchases for the first 6 months, 1% cash rewards on virtually all other purchases.
• Access to credit education: Wells Fargo provides you with all sorts of tools and information to learn about things like credit, budgeting, and expense tracking. While this is a nice feature, it’s not exclusive to Wells Fargo. You can get this information from free tools such as Mint, or even reading books and blogs. But it is pretty handy having it right at your fingertips when logged in to your account.

## Cons Cons

• Need to be a Wells Fargo member to apply online: You can go into any one of the 6,000+ branches and apply for the card. You can also apply online, but you’ll need to be an existing Wells Fargo customer. However, anyone can open a checking account online with a minimum deposit of \$25.
• High bars for some cash back redemption options: There are a lot of redemption options available through Wells Fargo’s own online cash back rewards mall. However, if you’d just like straight cash, you have a few options. You can request a direct deposit into your Wells Fargo checking account, savings account, or Wells Fargo credit card (if applicable) in \$25 increments, or request a paper check in \$20 increments. That can take a long time to accumulate if you’re not spending much with your card.
Bottom line

### Bottom line

The Wells Fargo Cash Back CollegeSM Card is a relatively simple card with a great intro bonus of 3% cash rewards on gas, grocery, and drugstore purchases for the first 6 months, 1% cash rewards on virtually all other purchases In addition, the low variable APR is handy for those who think they’ll be carrying a balance on their credit card from month to month at some point in the future. This is generally something we recommend against, but if you can’t avoid it, the Wells Fargo Cash Back CollegeSM Card is your best bet.

Read our full review of the Wells Fargo Cash Back CollegeSM Card

## Magnify Glass Pros

• Unlimited rewards. Earn unlimited 1.5 points for every \$1 you spend on all purchases everywhere, every time and no expiration on points.
• Flexible rewards redemption. You can redeem your points for a statement credit to pay for flights, hotels, vacation packages, cruises, rental cars or baggage fees. Plus, this card doesn’t restrict you to a particular airline or chain of hotels.
• Free FICO score. Keep track of your credit score via online banking or Bank of America’s mobile app.
• Chance to earn more rewards. Have an active Bank of America checking or savings account? Then this card offers a chance to get a 10% customer points bonus on every purchase. The card is also eligible for the benefits of the Preferred Rewards program, though that program is based on banking and/or investment balances that might be too high for many college students to qualify for.
• Foreign transaction fee? There is none.

## Cons Cons

• Points are not worth as much when redeemed for cash back. When redeemed for a travel credit, each point is worth \$0.01. However, if redeemed for cash back, points are only worth \$0.006 each. For example, 2,500 points redeemed for travel would be worth \$25. The same number of points redeemed for cash back would be worth \$15.
Bottom line

### Bottom line

If you’re looking for a student card offering travel rewards, the Bank of America® Travel Rewards Credit Card for Students could be a good option. With an annual fee of \$0 and points that can be redeemed for travel with any airline or stays with any hotel line, this card gives you options.

## Best Credit Union Card

### Altra Federal Credit Union Student Visa® Credit Card

Annual fee
\$0
Rewards Rate
Earn double Reward Points on every dollar of purchases in the first 60 days after opening your new account, then 1 point per dollar spent.
Regular Purchase APR
15.90% Fixed

## Magnify Glass Pros

• \$20 reward for good credit card usage: If you can maintain your account in an “exceptional way” for your first year, you’ll get a bonus \$20 reward on your card’s anniversary. All you have to do is not have any late payments, don’t charge over your card’s limit, and use your card for at least six out of twelve months.
• Up to \$500 random winner each quarter: It’s like playing the lottery, except you don’t have to buy a lottery ticket. Each quarter Altra will choose one student cardholder at random and pay back all of their purchases from the previous month, anywhere between \$50 to \$500.
• Earn rewards: For the first 60 days after you open your account, you’ll earn 2 points per dollar spent. After that you’ll earn 1 point per dollar spent. You can redeem these points for cash back, merchandise through their online rewards mall, or travel.
• Redeem points for a lower interest rate: If you’ll need a car in the future, this might be a good credit card to get. You can trade in 5,000 points for a 0.25% reduction, or 10,000 points for a 0.50% reduction on an auto loan through Altra Federal Credit Union. That could end up saving you a ton of cash in the long run.

## Cons Cons

• 1.00% of each transaction in U.S. dollars foreign transaction fee: This is definitely one card to leave at home if you’ll be traveling or studying abroad. Most credit cards charge a 3% foreign transaction fee, so this is on the low side. Still, it’s not too hard to find a student credit card with no foreign transaction fee, such as the Discover it® Student Cash Back or the Journey® Student Rewards from Capital One® card.
• Must join Altra Federal Credit Union: Luckily, anyone can join, but it might take a bit of legwork on your part compared to a bank. If you don’t meet certain membership eligibility criteria, you can join the Altra Foundation for \$5. Then you’ll need to open a savings account with a minimum \$5 deposit that must remain in the account while you have your card open.
Bottom line

### Bottom line

If you’re a student who doesn’t mind working with a credit union, Altra provides a card that has several rewards benefits. This card is a good option if you may be taking out an auto loan in the next few years, since you’ll benefit from a reduced interest rate by trading in your rewards points. In addition to earning rewards, using this card responsibly can help you build credit.

Read our full review of the Altra Federal Credit Union Student Visa® Credit Card

## Magnify Glass Pros

• Cashback program: This card has a feature uncommon to other secured cards — a cashback program. You earn 2% cash back at gas stations and restaurants on up to \$1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases – automatically.
• Cashback Match™: Discover will match ALL the cash back you’ve earned at the end of your first year, automatically. There’s no signing up. And no limit to how much is matched (new cardmembers only). This is a great added bonus that increases your cash back in Year 1.
• Automatic monthly reviews after eight months: Discover makes it easy for you to transition to an unsecured card with monthly reviews of your account starting after eight months. Reviews are based on responsible credit management across all of your credit cards and loans.

## Cons Cons

• Security deposit: You need to deposit a minimum of \$200 in order to open this card, which is pretty standard for a secured card. This will become your credit line, so a \$200 deposit gives you a \$200 credit line. If you want a higher credit limit, you need to increase your deposit. The security deposit is refundable, meaning you will receive your deposit back if you close the card, as long as your account is in good standing.
Bottom line

### Bottom line

The Discover it® Secured is great for students who want to build credit. This card easily transitions you to an unsecured card when the time is right, and you can earn cash back. With proper credit behavior, you’ll soon be on your way to an unsecured card.

Read our full review of the Discover it® Secured

## Best for No Credit History

### Deserve® EDU Mastercard

Annual fee
\$0
Rewards Rate
1% unlimited cash back on ALL purchases
Regular Purchase APR
20.24% Variable

## Magnify Glass Pros

• No credit history required: You can qualify for this card without any credit history, making this a great option for students new to credit. You don’t even need a Social Security number when applying.
• Reimbursement for Amazon Prime Student*: This card will reimburse you for the cost of a year of Amazon Prime Student (valued at \$59). You need to charge your membership to this card to qualify, and you will not be reimbursed for subsequent years’ membership fees.
• No foreign transaction fee: Whether you travel abroad or study abroad, you can rest easy: There are no foreign transaction fees with this card.

## Cons Cons

• Low cash back rate: The rewards program has a subpar 1% unlimited cash back on ALL purchases. You can do better with some of the other cards mentioned in this post. Though as a student, rewards shouldn’t be your primary focus — instead, build your credit so you can qualify for better non-student cards. (Note that if you’ve applied without an SSN, you won’t build credit with this card until you link an SSN to your account.)
Bottom line

### Bottom line

The Deserve® Edu Mastercard for Students is a great choice for students who are looking to build credit. Deserve markets their cards for those who may have trouble qualifying for credit, and students who fall into this category may more easily qualify for this card than for cards from traditional banks. You can earn cash back, and receive a great promotional offer of a year of Amazon Prime Student for free*.

## Also ConsiderAlso Consider

### Golden 1 Credit Union Platinum Rewards for Students:

This credit card offers a snazzy rewards program: rather than accumulate points, you’ll get a cash rebate instead. All you have to do is make a purchase. At the end of the month, you’ll get a rebate of 3% of gas, grocery, and restaurant purchases, and 1% of all other purchases deposited back into your Golden 1 savings account at the end of the month. Anyone who lives or works in California is eligible for credit union membership.

### What should I look for in a student credit card?

The most important thing to consider when looking for a student credit card is that it charges no annual fee. You should never have to pay to build your credit score. Fortunately, most student cards don’t charge you an annual fee, but it’s still something to watch out for.

The second most important thing you should keep an eye out for are tools that help you learn about credit or even promote good credit-building habits. For example, some student credit cards will give you a free monthly FICO® score update. You can use this freebie to see in real time how your credit score changes as you build credit history by keeping the card open, or paying down your credit card balance, for example.

The last thing you should be considering when picking out a student credit card is the rewards program. I know, I know, it seems counterintuitive. But stick with me — I’ll show you why in the next question.

### Why shouldn’t I be concerned about maximizing my rewards while in college?

Rewards cards are nice to have. But if you’re a college student, here’s the truth: you probably won’t spend enough to earn meaningful rewards.

Why? With a good rewards program, you can earn points or cash back. A small percentage of your monthly spending can add up quickly. However, given the tight budget that most college students live on, it will probably take a while to earn meaningful rewards. For example, if you earn 1.25% cash back and spend \$300 a month on your card, you would earn \$45 of cash back during the year.

College students are very good at making good use of \$45. And our favorite card offers a great cash back rewards program. Just don’t expect to earn a lot of cash back, given the tight budget of a college student.

### Why should I get a credit card as a college student?

There are a lot of great reasons why you should get a credit card, as long as you can commit to using it responsibly.

The single biggest reason why you should get a credit card as a college student is because you can start establishing a credit history now. When you graduate from college, you will need a good credit score to get an apartment. And your future employer will likely check your credit report. Building a good credit history while still in college will help prepare you for life after graduation.

Getting a credit card while in college can also train you to develop good credit habits now. But you need to be honest with yourself. If you find that you can’t avoid the temptation of maxing out your credit card, you might want to switch to a debit card or cash.

Finally, getting a credit card now can be the motivation you need to start learning about credit. These skills aren’t hard to learn, and they could save you thousands or even hundreds of thousands of dollars later in life (when you want a mortgage, for example).

### What is the CARD Act and why should I care about it?

Many years ago, credit card companies would market on college campuses. You could get a free beer mug or t-shirt in exchange for a credit card application. And you would be able to qualify for a credit card without having any income. The Credit Card Accountability Responsibility and Disclosure (CARD) Act was signed into law in May 2009 to change a number of practices.

### How did the CARD Act change student credit cards?

The CARD Act made a lot of changes in how credit card issuers do business with students. One of the biggest changes was requiring students to be able to demonstrate an ability to pay. If you are under 21 and do not have sufficient income (a campus job, for example), you would need to get a co-signer.

In addition, colleges must now limit the amount of credit card marketing on campus. The days of free t-shirts and pizzas in exchange for credit card applications are gone. But that doesn’t mean it is impossible for a college student to get a credit card. Some highly reputable banks and credit unions still offer student cards. And building a good credit score while still in college is still highly recommended.

### How can I protect myself from racking up debt?

When used properly, credit cards are a very convenient method of repayment. However, when not used properly, you can end up deep in credit card debt. It is important to establish a healthy relationship to credit now, with your first credit card.

You should try to ensure that you pay off your credit card bill in full and on time every month. Ideally, you should set up an automatic monthly payment. And to keep yourself on track, take advantage of alerts offered by most credit card companies. You can even get daily text messages reminding you of your balance.

### How can I automate my credit card usage?

If all of this sounds confusing, don’t worry. There’s actually a way you can automate your payments so you never even have to bother with the hassle of using a credit card. All it takes is a few minutes of upfront work.

First, you’ll need at least one recurring monthly bill of the same amount, such as Netflix or Spotify. Log in to your account and set up an automatic payment each month using your credit card. Make a note of how much your monthly bill costs.

Next, log in to your bank account. Set up a second automatic payment to go to your credit card each month for the same amount as the bill. If your bank doesn’t offer the option to set up automatic payments, you may also be able to set up your credit card to automatically withdraw the amount of the bill from your bank.

Because you know this bill will be for the same amount each month (barring any price increases), you can literally just leave this running in the background each month on autopilot. You don’t even have to carry your credit card in your wallet if you don’t want to. Then, when you graduate, you’ll automatically have an improved credit score!

### What happens to my student credit card when I graduate?

The information related to Bank of America® Travel Rewards Credit Card for Students and Deserve® Edu Mastercard for Students has been independently collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

### Here is a summary of our favorite cards:

Credit cards
Best for

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

# Top Checking Accounts for College Grads

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

For many college students, their default banking option while in school is a student checking account, which is typically free. Unfortunately, when you graduate you lose those benefits. Many student checking accounts will begin to charge you monthly maintenance fees unless you meet certain requirements.

So, where do you go from there?

Few young adults would turn to their parents for fashion or dating advice and, yet, one of the most common ways we’ve found young people choose their bank account is by going with whichever bank their parents already use. This could be a bigger faux pas than stealing your dad’s old pair of parachute pants.

The bank your parents use may carry fees or have requirements that don’t meet your lifestyle or budget, and make accounts expensive to use.

But where do you even begin to choose the right checking account?

Many banks send a letter in the mail a few months prior to your expected graduation date informing you that your student checking account is going transition to a non-student account. If you’re not careful and you disregard the letter, you may be transitioned into an account that charges a fee if you don’t meet certain requirements.

You can always call the bank and ask to switch to a different account or you can choose a new account that offers more benefits, like interest and ATM fee refunds.

Account Name

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

Simple\$0\$0None1.55%
Aspiration Spend and Save Account\$0\$50Unlimited0.25% APY
Discover Bank\$0\$0NoneNone, but 1% cash back on up to \$3,000 debit card purchases per month
Ally Bank\$0\$0Up to \$10 per statement cycle 0.10% to 0.50% APY depending on balance
Consumers Credit Union (IL) Free Rewards Checking\$0\$0Unlimited ATM reimbursements5.09% on balances up to \$10,000,
0.20% APY on balances between \$10,000 and \$25,000 and 0.10% APY on balances over \$25,000
La Capitol Federal Credit Union Choice Plus Checking\$0(if less than \$1,000, there is a \$8 fee)\$50Up to \$25 per month4.25% APY on balances up to \$3,000 2.00% APY on balances \$3,000-\$10,000 and 0.10% on balances over \$10,000
T-Mobile Money\$0\$0None4.00% APY on balances up to \$3,000, 1.00% APY after that
Partner Colorado Credit Union High Interest Checking\$0\$0None3.50% APY on balances up to \$10,000, 0.50% APY on balances \$10,000 - \$25,000, 0.10% APY on balances over \$25,000

## The 5 key things you should look for in a checking account

When you’re shopping around for a new checking account, there are several things you should look for to ensure you’re getting the most value from your account:

1. A \$0 monthly fee: Sometimes banks may say they don’t charge a monthly fee but read the fine print — they may require a minimum monthly balance in order to avoid it. There are plenty of free checking accounts available for you to open, so there’s no reason to stay stuck with an account that charges a monthly fee. Take note, as some accounts may require you to meet certain criteria to maintain a free account like using a debit card, enrolling in eStatements or maintaining a minimum daily balance.
2. No minimum daily balance: Accounts without minimum daily balances mean you can have a \$0 balance at any given time. This may allow you to have a free account without meeting balance requirements — although other terms may apply to maintain a free account.
3. Annual Percentage Yield: APY is the total amount of interest you will earn on balances in your account. Opening an account that earns you interest on your balance is an easy way to be rewarded for money that would typically sit without earning anything. You should definitely aim to earn a decent APY on your savings account.
4. ATM fee refunds: You may not be able to access an in-network ATM at all times, so accounts providing ATM fee refunds can reimburse you for ATM fees you may incur while using out-of-network ATMs. Those \$3 or \$5 charges add up!
5. No or low overdraft fees: Most banks charge you an overdraft fee of around \$35 if you spend more money than you have available in your account. Therefore, it’s a good idea to choose an account that has no or low overdraft fees.

## Top overall checking accounts for college grads

For the top overall checking accounts, we chose accounts that have no monthly service fees, no ATM fees, refunds for ATM fees from other banks, interest earned on your deposited balances and with strong mobile banking apps. While there is no all-inclusive account that contains every benefit, the accounts below are sure to provide value whether you want a high interest rate, unlimited ATM fee refunds or 24/7 live customer support.

### 1. Simple

Cash management app Simple acts as a hybrid checking and savings account with a generous APY and no fees. It features unlimited transfers between your checking account and Protected Goals account, as well as a decent APY of 1.55% on balances in your Protected Goals account. Simple also provides fee-free access to 40,000 ATMs – although it doesn’t rebate ATM fees you might incur from machines outside its vast network. With built-in budgeting tools integrated into its app, Simple is a strong contender for the best checking account for college grads.

on Simple’s secure website

### 2. Aspiration Spend and Save Account

The Aspiration Spend and Save Account offers a wide range of benefits for account holders and has few fees. The \$50 amount to open is fairly low, and once you open your account there is no minimum monthly balance to maintain. Aspiration gives you up to five free ATM withdrawals per month.

As the account name suggests, there are two sides to the account: a spending sub-account and a savings sub-account. The spending side yields no interest, while the savings side earns 0.25% APY. To earn this APY, you must deposit at least \$1,000 in the combined account monthly, or maintain a balance of \$10,000.

on Aspiration’s secure website

### 3. Discover Cashback Debit

Cracking our list for the best checking accounts for college graduates is Discover Bank, which takes a unique approach to checking account rewards. Instead of offering an APY on deposit balances, Discover opts for cash back as an incentive to get consumers to sign up for its checking product. The Discover Cashback Debit account offers up to 1% cash back on \$3,000 of debit card transactions per month. That coupled with its zero fees and free access to 60,000 ATMs nationwide make it one of the best checking accounts for college graduates.

Discover Bank's website is secure

Member FDIC

### 4. Ally Bank

Online bank Ally Bank offers a solid checking account with minimal fees, decent APYs and other attractive perks. Its Interest Checking account charges no monthly maintenance fees and provides free access to Allpoint ATMs nationwide, as well as a \$10 reimbursement per statement cycle for any other ATMs fees incurred. Ally Bank’s APY isn’t too shabby, either: You can earn an APY of 0.50% with a \$15,000 minimum balance. Other cool features include its Ally Skill for Amazon Alexa, which enables you to transfer money with just your voice.

Member FDIC

## Top high-yield checking accounts for college grads

Since most checking accounts offer little to no interest, high-yield checking accounts are a great way for you to maximize the money that typically would just sit in your account without earning interest. These accounts often offer interest rates that fluctuate depending on how much money you have in the account. However, in order to earn interest, there are some requirements that you may have to meet such as making a certain number of debit card transactions and enrolling in eStatements.

### 1. Consumers Credit Union (IL) Free Rewards Checking

The Consumers Credit Union (IL) Free Rewards Checking account is just that: Rewarding. It offers a tier-based APY, which includes a 5.09% APY on balances up to \$10,000, 0.20% APY on balances between \$10,000 and \$25,000 and 0.10% APY on balances over \$25,000. In order to earn the highest APY, you must complete at least 12 signature-based debit purchases totaling \$100 or more, receive at least one direct deposit, ACH debit, or pay one bill through their free bill payment system totaling \$500 or more, log into your online banking account and be signed up for eStatements and spend \$1,000 or more with a Consumers Credit Union Visa credit card each month. This account has no fees and offers unlimited ATM reimbursements if requirements are met.

on Consumers Credit Union (IL)’s secure website

NCUA Insured

### 2. La Capitol Federal Credit Union Choice Plus Checking

This checking account has a \$2 monthly service fee, which can easily be waived if you enroll in eStatements.

While the terms state a minimum balance requirement of \$1,000 and a low balance fee of \$8, the fee can be waived if you make 15 or more posted non-ATM debit card transactions per month.

To earn the top interest rate on your checking balance, you just need to make at least 15 or more posted non-ATM debit card transactions per month. There are numerous surcharge-free La Capitol ATMs for you to use, and after signing up for eStatements you can receive up to \$25 per month in ATM fee refunds when you use out-of-network ATMs.

on La Capitol Federal Credit Union’s secure website

NCUA Insured

### 3. T-Mobile Money

Wireless carrier T-Mobile has forayed into finance with a checking account, T-Mobile Money. The account offers a generous APY of 4.00% on balances up to \$3,000, with balances over that threshold earning 1.00% APY. In order to receive the higher APY, you must meet the following requirements: Be enrolled in a qualifying T-Mobile wireless plan, be registered for perks with your T-Mobile ID and have deposited at least \$200 in qualifying deposits to your checking account within that current calendar month. T-Mobile Money does not reimburse for out-of-network ATM fees, but it does not charge any maintenance fees.

on T-Mobile Money’s secure website

Member FDIC

### 4. Partner Colorado Credit Union High Interest Checking

Despite its name, Colorado Credit Union is open to anyone who makes a \$5 donation to the Partner Colorado Foundation. Currently, it’s offering an APY of 3.50% on balances in its High Interest Checking account ranging from \$0 to \$10,000. Meanwhile, balances between \$10,000 and \$25,000 earn an APY of 0.50%, while balances over \$25,000 earn an APY of 0.10%. In order to earn the high APY, you must meet the following requirements: Make at least 20 debit card transactions of at least \$5 per month, receive eStatements and use mobile or online banking. There are no minimum balance requirements for this account, and there is no fee when using your PIN for purchases.

on Partner Colorado Credit Union’s secure website

NCUA Insured

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