SACRAMENTO — The photo ID cards issued to UC Davis students this fall will have a new feature: a built-in connection to a bank that wants their business.
The cards students use to borrow books from the library and work out in the campus gym will now double as ATM debit cards — if they sign up for a US Bank account.
California State University campuses in Turlock and Sacramento have a similar arrangement with Wells Fargo. The University of California at Merced does not have any such program, a spokeswoman said this week.
California State University, Stanislaus, also has had a program called Warrior Cash since 2004, said spokeswoman Eve Hightower. Students can use their IDs as debit cards, hooked to accounts into which they or their families can put money. The cards can be used at several local businesses, and to pay fees and other expenses on campus, Hightower said.
In Sacramento, new students going through orientation this week stopped in a campus office to have their pictures taken, then proceeded to a tent where Wells Fargo employees offered free iPod speakers to those linking their ID cards to a new Wells Fargo account.
The campuses are part of a growing group of universities striking deals to sell access to their students. With budget deficits putting the squeeze on many campus programs, college officials say the arrangements allow them to preserve services. Banks, in turn, get to market their products directly to college students — one of the most coveted consumer groups.
The banks partnering with the colleges aren't allowed to market credit cards or student loans. Still, consumer watchdogs and education experts are concerned about the trend of blending student ID cards and ATM debit cards. Last year, 134 colleges nationwide had bank contracts for combo student ID/ATM debit cards — nearly triple the number in 2003, says industry tracker CR80News.
Critics worry about overdraft fees and other bank terms, potential conflicts of interest between university leaders and bank officials, and the general notion that students are for sale.
"People really trust that their schools have their best interest in mind, that they're not going to sell them out," said Stephen Burd, a higher education expert with the New America Foundation think tank. "We find it concerning that a university may have another agenda, purely for financial reasons."
Under the contracts UC Davis and Sacramento State have with their respective banks, the amount the banks pay the colleges depends on how many students and employees create accounts.
At UC Davis, the annual payment from US Bank will range from $105,000 to $680,000, with an estimated average annual payment of $280,000, according to a university spokeswoman. Wells Fargo's annual payments to Sacramento State range from $15,000 to $425,000.
UC Davis will use the money it gets from US Bank to support student services, including the cross-cultural center and the advising center, said Brett Burns of campus student affairs.
"It's a new source of revenue for the university in a very financially challenged time," Burns said.
"We are giving something up here — access to our students. But on the flip side of that we were going to lose certain student services on campus."
The ability to make more money by getting more students to sign up for bank accounts creates an incentive for colleges to permit heavy marketing on campus. This week's orientation at Sacramento State included a stop at a tent where seven Wells Fargo employees pitched the benefits of banking there.
Some like convenience
Ashley Lunardelli, 21, was convinced. A Wells Fargo rep took her to a shady picnic table nearby and helped her complete the paperwork to open an account.
"I think it's extremely convenient," said Lunardelli, who has an account with Chase. "They have Wells Fargo ATMs here. They don't have Chase."
UC Davis students will also find sales pitches at their orientation this fall. The university's contract gives US Bank "exclusive access to, and presence at, significant on-campus events to advance the opening of new bank accounts." Those include new student orientation, the start of the semester, student activity fairs and athletic events, the contract says.
"We see it as a great way to establish relationships with the future customers of our bank," said Whitney Bright, vice president of campus banking for US Bank.
US Bank now has ATM card agreements with more than 50 colleges nationwide, including CSU campuses in Sonoma, San Diego, San Bernardino and Fullerton. Its deal with UC Davis is the first such agreement in the UC system.
Wells Fargo has 43 college contracts across the country.
"The banks are essentially getting a pipeline to a population that is very likely to overdraft," said Kathleen Day of the Center for Responsible Lending. "Parents really hate it."
Banks make $24 billion a year from overdraft fees — typically about $34 per transaction, Day said.
Banks counter that new Federal Deposit Insurance Corp. rules taking effect this weekend eliminate concerns about overdraft fees in college banking programs. The new rules require customers' written permission before banks can charge overdraft fees.
Other concerns have been raised about relationships between university leaders and bank officials. In 2007, after a University of Wisconsin campus struck a deal with US Bank, a Milwaukee newspaper reported that the chancellor was on the bank's local advisory board.
Modesto Bee staff writer Patty Guerra contributed to this report.