LAKE BLUFF, Ill.-After seven years holding steady, credit unions changed their overdraft price this past year, moving closer to banks' pricing.
Credit unions' national median price is $27 per overdraft, up from $25, while banks are at $30 nationally, according to Moebs $ervices, which just completed an OD survey of 2,700 financial institutions (Credit Union Journal, Sept. 24).
"Interestingly, when the depository size is examined, the community banks, those institutions of $100 million in assets or less, have the same price as credit unions of $100 million in assets or less," observed Michael Moebs, CEO of Moebs $ervices.
"These Main Street institutions did not change their prices in 2011, staying at $25," Moebs continued. "Credit unions greater than $100 million in assets did change their price to $28 from $27, while those above $5 billion in assets have a low price due to low costs. The very large Wall Street banks charge $35, reflecting their high cost structures."
Why are some credit unions increasing price, especially with volume up in checking and corresponding service charges on deposits, asked Moebs. "The problem lies with the credit unions greater than $1 billion in assets and less than $5 billion. This group should be operating at their economy of scale but are not," said Moebs. "They have to increase price to get the net income to maintain or increase capital to support their growth. The other asset groups are controlling expenses and letting the volume, especially in fees, increase their bottom-line net income. We have a large group of credit unions that are at their economy of scale and must focus on efficiency instead of growth."
The Moebs $ervices' study showed that overdraft volume at FIs continues to climb, and credit unions are getting their share, enjoying their best 12-month period for OD revenue in their history, thanks largely to tremendous checking growth. In the last 12 months CUs collected $5.5 billion in overdraft revenue. Previously, the best 12-month period (ending June 30, 2010) was $5.3 billion.