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The hidden cost of “free”

As a college student, you’re probably bombarded with commercial offers all the time. Companies are eager to get buy-in from college students like you in hopes that if you commit to the company now, you’ll stick with them for the long haul and become a lifelong customer.

Some of the offers you receive may seem unbelievably good – free accounts, loyalty rewards, vacations, etc. – and it may be tempting to sign up for them right away. Before you sign the dotted line, learn how to analyze these offers so you can decide which ones are actually free and which have hidden costs.

  • For what? First, determine what you’re actually being offered. If it’s something you have no need for or interest in, there’s really nothing more you need to consider. Avoid accepting offers for things you don’t need just because they sound good. This can lead to unnecessary debt.
  • From whom? If you decide the offer is for something you truly need, the next step is to identify who’s making the offer.  Make sure it’s coming from a legitimate source and isn’t a scam or phishing attempt to collect your personal information. Check reviews of the company and research how many and what types of consumer complaints have been filed against them.
  • Fine print? If you determine you need the product or service and that the company is reputable, be sure to read the fine print to identify hidden costs. There may be none, or there may be several. For instance, you may get an offer for a free checking account. Before you sign up, know what you have to do to keep the account free. Is there a minimum balance requirement? Do you have to pay for checks? Are there high fees for using an out-of-network ATM? For example, you may get an offer for a free vacation. Before accepting, know the requirements and limitations. Do you have to attend an information session? Do you have to open a membership? Can you only travel on Tuesdays at 3 a.m.? Make sure the free offer is worth it.

Even if offers pass all three of these tests, think carefully about which (and how many) you accept. Consider how each can impact your finances in the long run by making you more likely to spend money, accrue debt, or make poor financial decisions.

For offers that you don’t want, shred them rather than tossing them in the garbage if you received them on paper. Identity thieves and fraudsters are known to dumpster dive and can use the prefilled information on offers to attempt (and possibly succeed in!) opening accounts in your name.

The content provided in this article is for informational purposes only. Nothing stated is to be construed as financial or legal advice. PSECU recommends that you seek the advice of a qualified financial, tax, legal or other professional if you have questions.