When Bank of America’s debit card fee became a point of contention for many cash-strapped consumers, millions let their money do the talking by closing their big bank account and parking their funds at a credit union.
Low fees and higher rates appealed to the vast majority of financially sensitive Americans, but lately some are crying foul saying that their credit unions’ fees are still too high.
According to independent consulting firm Callahan & Associates, total credit union non-interest income in the third quarter reached $10.7 billion; the highest total since 2009 and 18.0% over the first nine months of 2011.
Callahan reports that other operating income increased to $4.9 billion, a 30.3% increase from year-to-date numbers since last September.
“The fact other operating income is primarily responsible for the overall increase in non-interest income reflects the cooperative spirit of the credit union industry,” Jay Johnson, executive vice president of Callahan & Associates said in a press release. “Instead of taking extreme cost-cutting measures, credit unions found other ways to return value to the member.”
Callahan adds that despite the growing numbers, fee income for the average member as of September was at its second-lowest level of the past five years.
Comparing The Fees
In February 2012, Consumer Reports made a side-by-side comparison between the fees banks charge versus what a consumer might find at a typical credit union.
According to the report, the largest credit unions still charge lower fees on average than the biggest banks. Broken down in a graphic, Consumer Reports shows:
Non-interest checking monthly fee: Banks charge $10.27. Credit unions charge $6.
Minimum balance required to waive fees: Banks require $1,115.97 versus credit unions at $500.
Online bill pay fees: Banks charge $6.95 versus the credit union fee of $0.
For using another bank’s ATM: Bank fee is $2.21. Credit union fee is $1.07.
ATM surcharge: Bank fee is $2.96 versus credit union fee of $2.79.
Insufficient fund fee: Banks charge $34.48. Credit unions charge 27.82.
Stop payment fee at a bank is $31.09 versus the credit union fee of $19.43.
Overdraft fee at a bank is $34.48 versus a credit union fee of $27.82.
In addition to comparing average fees, Consumer Reports compared similar accounts between the biggest banks and credit unions. For example, JP Morgan Chase’s “Total Checking” product requires a $1,500 minimum balance and/or at least $500 in monthly direct deposits to avoid the $12 monthly fee. Minimum overdraft and stop payment fee for this account is $34.
On the credit union side, Navy Federal Credit Union’s ($51 billion, Vienna, VA) “Everyday Checking” is completely free with no minimum monthly balance requirement. Minimum overdraft fee for this account is $29 and stop payment fee is $20. Pentagon Federal Credit Union’s ($15 billion, Alexandria, VA) basic checking account does charge a $10.00 monthly fee, but members only need to maintain a $500 monthly average balance and any direct deposit qualifies.
Why Do Credit Unions Charge Fees?
As with any nonprofit organization, credit unions have to pay its employees, keep the lights on and provide competitive products and services to its members--all which cost money.
"Credit union users like knowing that there's no conflict of interest," Bart James, personal finance expert tells the Atlanta Journal-Constitution. "If a credit union makes a profit, it goes back into the organization to help its members, whether that's in the form of a lower interest rate on a mortgage or a lower price on new checks."
Ryan Misasi, EVP/Chief Retail Operations at Patelco Credit Union ($3.8 billion, Pleasanton, CA) told Credit Unions Online that fees are important to maintaining the high level of service its members have come to appreciate from their credit union.
“Even though we are a not-for-profit, we still need to charge some fees - these fees go back into the services that Patelco offers to members such as lower loan rates and higher interest rates. We aren’t charging fees to get rich, but instead to be able to keep operating and offering great products and services to our members.”
In fact Misasi adds that Patelco’s fees are comparable to local competitors and in some cases less. “Additionally, we recently decided not to charge an overdraft transfer fee whereas other credit unions are charging around $4 per transfer and the big banks are charging $10 or even more."