LAKE BLUFF, Ill. (7/10/13)--The national average price for overdrafts (ODs) on checking accounts rose to $30 as of June, matching the national average charged by banks the past four years. The cost of overdrafts has risen steadily since 2009, according to a new study, which shows credit unions again remain the best deal for consumers.
Credit unions' average for 2013 is $28, one dollar higher than in December 2012, but still considerably lower than what banks have charged the past five years studied, according to data from Moebs Services, a Chicago-area economic research firm specializing in financial services. Banks have charged an average $30 since 2010, when they increased the price from $29. Credit unions charged $25 from 2009 through 2011 before increasing the fees in 2012 to $27.
"Despite the increases by credit unions (the past two years), their OD fees remain $2 lower than banks, which is still a statistical difference," said Michael Moebs, economist and CEO of Moebs Services. "Credit unions' falling OD volume forces them to increase price to maintain revenue. Overall industry OD revenue fell in the first quarter to an annualized total of $31.1 billion," he said.
However, it may not be the price itself but the frequency of assessing OD charges that underscore the fact that credit unions are the better deal for consumers, said the Credit Union National Association.
"In our experience, the stated price of an overdraft fee is not a good indicator of the impact on users," said Paul Gentile, CUNA executive vice president of strategic communications and engagement. "A better indicator is how often the fees are assessed. The data suggest that credit unions impose the fee much less frequently than do banks--resulting in a lower dollar value of fees paid by credit union members than that paid by bank customers," he said.
He cited a 2009 study by Victor Stango, PhD., University of California, and Jonathan Zinman, PhD., Dartmouth College, that found bank accountholders incurred more overdraft fees in a typical year--paying fees on an average of four transactions per year. Credit union members, by contrast, paid the fees for an average 1.5 transactions per year.
In the Moebs study, the largest of the 2,906 depositories reporting fees as of June, had the highest price--an average of $35 for institutions in two asset categories above $5 billion in assets. That compared with $29 in the $100 million to $500 million asset range and with $25 for smaller institutions.
"The consumer who occasionally or frequently overdrafts saves substantially by going to community banks and credit unions," Moebs said. He noted that institutions with $25 billion to $50 billion had the largest increase--16.7%--in average OD price--to $35 in 2013 from $30 in 2012.
The survey also noted regional differences. Financial institutions in the West and Midwest had lower OD prices with a median of $29, compared with $30 in the South and East.