LAKE FOREST, Ill—Credit unions charge some of the lowest—and highest—overdraft prices in the country, according to a new OD study from Moebs $ervices.
The $83-million Employees Credit Union in Estherville, Iowa, is about the lowest in the country at $6 per overdraft, while the $1.2-billion Campus USA CU in Gainesville, Fla., at $45 is tied with two banks for the highest OD fee among FIs in the study.
Daniel State Savings Bank in New London, Iowa, has the lowest fee ($5). Lorraine State Bank in Lorraine, Kans., came in third lowest ($7.50), Oak Creek Valley Bank in Valparaiso, Neb., charges $8 along with the $168-million PCM CU in Green Bay, Wis.
Along with Campus USA, mBank in Manistique, Mich., and First South Bank in Washington, N.C., charge $45. Schaumberg Bank & Trust Co. Schaumberg, Ill., charges $42, and Florida CU in Gainesville, Fla., assesses a $41 fee.
The Moebs June 2014 study of 2,806 depositories showed that, on average, the South and Midwest have the highest individual overdraft prices among all FIs, and the Heartland the lowest.
The median overdraft fee among all FIs is $30, a figure holding steady for two years. However, credit unions have been increasing price, inching closer to banks and thrifts and are now at $28.50 per overdraft.
Michael Moebs, economist and CEO at Moebs $ervices, said the wide range of OD pricing results from different approaches to overdrafts.
“Overdraft prices fit broadly into two categories: penalty price or safety net price. Penalty pricing is when a financial institution does not want consumers to overdraw their checking account and has a very high price to discourage this behavior,” Moebs explained. “While some view penalty pricing as a means of generating the maximum amount of revenue, this pricing method can drive overdraft users away from the institution.”
Safety net pricing, said Moebs, is set as low as possible to provide assistance to those checking account holders who have financial difficulties or just cannot track their financial behavior.
“Some say safety net pricing increases revenue by encouraging more volume,” shared Moebs. “With safety net pricing, the cost of the service may have to be subsidized to keep low prices.”
Bottom line, Moebs said, “There is no good or bad price. Just a right price meeting the needs of the customers, members, stakeholders and the institution.”