LAKE FOREST, Ill—Credit union annual overdraft revenue hit an all-time high of $6.2 billion last year, surpassing the movement’s previous high ($5.9 billion) in 2015 total by 5.1%, according to a new study.
The latest Moebs $ervices Overdraft Study shows that credit unions have increased OD revenue for two reasons, said Michael Moebs, economist and CEO at Moebs $ervices, noting that in 2014 CUs experienced a revenue decline—the first time in the last 10 years—of 3.4%.
“First, they have increased the overdraft price to $29, just short of the combined national OD price of $30,” he said. “With the continued increases, CUs should hit $30 an overdraft in 2017 and be on a par with banks and thrifts. This is not unusual since from 2005 through 2008 banks, thrifts and credit unions had the same price.”
The second reason for CUs’ record year is free checking, asserted Moebs.
“As the banks and thrifts exit free checking, credit unions have picked up those customers who are leaving,” said Moebs. “Free checking is often used by transaction-oriented consumers who may have trouble with their finances and often fall short between paychecks. Credit unions benefit their members with low-cost checking, but also provide support with pay
Michael Moebs, Moebs $ervices
ing overdrawn accounts.”
Overall OD Revenue
Last year CUToday.info reported that Moebs $ervices data showed that CUs were on pace to set an overdraft income record.
Overall in 2016, OD revenue for banks, thrifts and CUs increased 2.6% to $33.3 billion, the report shows.
“Strong results in the last half of the year moved revenue higher for banks and credit unions while thrifts stayed the same. Overdraft prices stayed about the same, with some increasing and some reducing OD price. Volume inched up about 1.2% to 2010 levels,” Moebs explained.
The number of overdrafts per household (3.1) has stayed the same over the past three years.
“The average consumer checking account balance dramatically rose in 2016 as the consumer’s uncertainty before and after the election is still high,” said Moebs, who collects and calculates the overdraft data. “As the consumer stockpiles money in checking the risk of overdraft is reduced. Lack of wage and job growth has many households still with unstable finances.”
Moebs Overdraft Studies are a combination of data sources featuring a statistical survey of 3,817 banks, thrifts and credit unions with an audit rate over 30%, said Moebs. Moebs OD data includes a census of all banks, all thrifts and all credit unions with assets greater than $500 million. Moebs data incorporates all overdrafts services including: overdrafts, NSFs, transfer fees and true penalty items such as stop payments and return of deposited items.