LAKE FOREST, Ill.—A new study shows credit unions are generating much more fee income from their checking accounts than banks or thrifts.
The Moebs Checking Study shows the average consumer pays $9.06 a month in service charges for a checking account among all FIs, but credit unions receive 42% above the normal service charge, collecting $12.90 monthly.
The report also reveals that while all FIs lose money on checking accounts, CUs lose the least.
The service charges included in the study, include account maintenance fees, minimal balance fees, overdrafts, ATM charges, and other regular service fees, but do not include swipe fees from debit card usage.
“You can’t buy a cooperative organization, such as a credit union,” said Michael Moebs, economist and CEO of Moebs $ervices. “However, if you are a bank you might want to look very closely at how credit unions make their members happy with free checking and low prices, yet are able to gain the trust of their members to pay much more than their competition in charges.”
Nine-out-of-Ten FIs Lose Money on Checking
The Moebs Checking Study shows that 94% of almost 10,000 depositories that offer checking to consumers lose money on their checking portfolios. “Even if you add interchange revenue from swipe fees, banks and thrifts and CUs still lose money on checking,” said Moebs.
The average cost to a financial institutions from a checking account is approximately $20 a month, according to the Moebs Checking Study. For large banks that cost is even higher, at $30 to $40 per month per account in checking account expenses.
Michael Moebs
“The transactional account business is very expensive, even with modern technology,” said Moebs.
Moebs was an advisor to the Federal Reserve Functional Cost Analysis (FCA) from 1995 to 2002 when the Federal Reserve ended the FCA of all retail financial services. Moebs $ervices restarted the FCA in 2003.
Swipe Fees Help, But…
“If you add swipe fees along with service charges, credit unions come the closest to making checking profitable, while the large banks lose a lot in checking accounts. Even the thrifts with their low expense structures still have checking portfolios more unprofitable than credit unions,” noted Moebs.
At depositories, the key is balancing costs with revenue to achieve a profitable checking portfolio. “In the long run, those financial institutions that have good control of their expenses in checking could be the real winners,” concluded Moebs. “And, the credit unions might be the last ones standing.”