Sharing The Credit Union Difference With Our Legislators: What We Showed Them & Why
As a Business Intelligence Analyst at Call Federal, it’s my job to pore through transaction data and identify activities and processes that can be streamlined to save money for the credit union and its members. Last week, I had the opportunity to join my colleagues from credit unions across the state as we met with legislators to remind them of the valuable service we provide to the people of Virginia and why the credit union movement is worth protecting. Since I had done my research, I thought I would take the opportunity to share with you some of the facts and figures that we shared with them.
According to the Consumer Financial Protection Bureau (CFPB), there are over 109 million US households that have a checking account. Would you believe that the average person wastes $1000 in checking account fees over the course of a decade? At credit unions, that number is two-thirds lower. More than 72% of the credit unions in the nation provide free checking accounts, unlike a mere 38% of banks. The average minimum balance to open a checking account in banks is a whopping $65.83; by comparison, that figure is only $9.84 when it comes in credit unions.
Three Types of Fees
In their breakdown of the CFPB report, the personal finance blog, Nerdwallet, showed that financial institutions earn about $10.7 Billion, primarily from 3 types of fees: overdraft (& related fees), ATM usage and account access charges, and fees for monthly maintenance and upkeep.
The adage “the poor pay the most” is never truer than when it comes to overdraft fees and insufficient funds penalties. That same CFPB report showed that just 8% of customers incur nearly 75% of all overdraft fees. Can you imagine losing a week’s pay in overdraft fees alone? According to Nerdwallet, a majority of the overdraft fee victims were individuals that made less than the national median income of $54,000. The average banking customer has an average of two overdrafts per year; the median overdraft fee is approximately $34 per transaction. To put it in perspective, that $4 latte is now $38; a $10 value meal is now nearly $44. And it doesn’t have to stop there. Some banks will hit you with another hidden fee called an ‘extended overdraft fee’ if you fail to correct your negative balance within a few days. Contrast that with credit unions, where the average overdraft fee is $8 less. And while that can still be a stiff penalty for a potentially small mistake, credit unions have earned a reputation of trying their best to work with their members. Rather than triggering a hidden fee, credit unions typically provide financial education to help prevent additional account overdrafts.
And that’s not all! Need cash but aren’t near any of your bank’s branches? Out-of-network ATM fees are almost double for banks, with an average charge of $2.50 per transaction, compared to $1.50 for credit unions. This really adds up over time, especially when you consider that non-network ATM operators will tack on an additional usage fee, which averages $2.75, according to the Informa Research services.
In a survey that sampled two million checking accounts, customers paid an average of $5.21 in overdraft fee, $1.66 for ATM usage, and $1.28 in account maintenance fees – per month! Multiply that by twelve months in a year and then ten years in a decade and there’s your $1000, a sum that could have made a nice investment but instead was wasted on avoidable fees.
The Credit Union Difference
I know what you’re thinking: banks have more services and need more employees which increases their operating cost. It’s simply not true. It’s really a matter of structure, not overhead. Banks have shareholders to satisfy in addition to their customers; at a credit union, the members are the shareholders. Rather than charge exorbitant fees to pump up a stock price, a credit union uses its earnings to offset its costs and keep fees low, all while providing as good or, in many cases, better service than you would find at a traditional bank.
The Credit Union Movement is all about “People over Profits” and it was a pleasure to share what makes us difference with our legislators.