Consumers can still find a healthy price advantage on fees associated with account overdrafts at credit unions compared to banks, according to Mike Schenk, the Credit Union National Association’s vice president of economics and statistics.
“Based on Informa Research Services daily rate comparison of thousands of banks and credit unions nationwide, credit unions on average charge nearly $3.00 less for non-sufficient fund (NSF) fees than do banks; $28.08 compared with $30.81.”
Schenk’s reminder was prompted by a widely publicized article that claimed that while credit unions still charged less on NSFs, banks had closed that gap to $1. The article cited a Moebs Services figure that more than 40 million Americans overdraw their checking accounts every year.
“Even at the $1 difference, credit unions would be saving consumers millions of dollars,” Schenk pointed out. “However, Informa data suggests credit unions are saving members almost three times what the article implies.”
Schenk added that it is important to note that what really matters is not simply the size of the fees an institution advertises but how likely those fees are to be imposed.
Research shows that on an all-in basis credit union members pay less than one-half the amount bank customers pay on their checking accounts annually. In a comprehensive panel study of consumers’ detailed bank and credit union account statements, researchers Victor Stango (UC-Davis) and Johnathan Zinman (Dartmouth) found that credit union members incurred an annual average of $72 in total checking fees whereas bank customers incurred an annual average $183.
In fact, the researchers also found that credit union members with low balance accounts paid less in annual total checking account fees than did bank customers with high balance accounts.
Consumers not only benefit from lower credit union fees, but also from lower loan rates and higher savings rates, Schenk reminded.
He noted the average interest rate on a credit union 5-year new car loan is 2.58% today while the average interest rate on a similar bank loan is 3.59%–a 1.21 percentage point difference. That difference will result in an approximate $975 savings over the 5-year life of a $30,000 new car loan.
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