Credit Unions Increased Overdraft Fees Revenue Q1 2018
It used to be that Credit Unions were the safe harbor for regular people. They had the small town feel of the banking industry. More personal service and a promise of reduced or eliminated fees. According to a Credit Union Journal report that isn’t so much the case anymore. In the first quarter of 2018 Credit Unions increased overdraft fees revenue by 6.6%. That is during a time when big banks have had a decrease in overdraft fees revenue of 1.3%.
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Not As Bad As It Seems
According to the report it is not as bad as it seems. It is believed that the increase in revenue has been spurred on from people leaving the big banks. Not of their own volition though, they are being told to take a hike by the big banks.
The larger banks are shedding “unprofitable customers”. People that only have checking accounts do not drive enough revenue and they are telling them thanks but no thanks. Larger banks are looking for customers to have at least two services. These customers tend to end up at the credit unions. They also tend to be the people who overdraft their account since they don’t have a savings or credit card account for overdraft protection.
Other Interesting Facts
Some other interesting financial info that was in the article is that people seem to be hesitant with the current economy. Usually bank account balances are around 4% of the value of the stock market. Currently that percentage is over 13% which means more people are holding onto their money rather than put it into the stock market.
There are about 1.1 billion overdraft transactions per year. That number is staggering, especially when you consider that they come at $30-40 a pop.
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Conclusion
Although it is believed that an increase of customers is leading to this spike in revenue for Credit Unions I still find it a little disheartening. I always believed credit unions were more for the people, by the people type of places. I would expect them to have lower overdraft fees which would make this a smaller part of their business. Hopefully the largest offenders get some of their money back with their yearly credit union dividend checks.
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I’ve been a credit union person for well over 30 years. We joined our current CU 11 years ago when we last moved as they had a local office in our golf course clubhouse.
I have not had a true overdraft fee in many years but I’ve forgotten to move money around between accounts a few times and that does incur a small fee.
The staff in the local branch know me by name (and I know them by name) and they have provided us with our home mortgage and a car loan at great rates.
Overall I would NEVER go back to banking with a bank to get impersonal service and charged crazy fees.
Credit Unions definitely are more customer friendly
Depends on the credit union. I belong to multiple credit unions; some are really by and for the members. Some others seems as profit-driven (even though technically non-profits) and almost as predatory as larger banks. I won’t name names, but caution other readers to carefully review the fees, terms and condition of any credit union they are considering joining, and to stay abreast of changes in those fees, terms, and conditions after they’ve joined.
Credit Unions actually have a more legitimate reason to charge overdraft fees for customers with no affiliated accounts as back up. Banks use the Federal Reserve system and for years the Fed has wondered why banks even charge a fee for overdrafts. If there is any cost associated with overdrafts, it is pennies per transaction. The fee is pure profit, one of those “because we can” charges. Credit unions, being member owned, take risks with overdraft transactions and need to protect their owners as opposed to looking good for Wall Street.
Not that I think anybody should charge a fee for delivering no service in the 21st century!
Good point – thanks Dave