Credit unions are twice as likely to offer free checking accounts than banks, according to a new survey conducted by Bankrate.com.
Results of the personal finance website’s study found that of the country’s 50 largest credit unions, more than three-quarters (76%) offered free checking accounts – that is, they levied no service fees or transaction fees, regardless of a customer’s balance or frequency of activity.
In contrast, only 37% of banks offered such free checking services.
Six years ago, in 2010, 78% of credit unions offered free checking accounts to everyone, while 65% of banks did likewise – reflecting a dramatic decline in the number of banks providing such products and services.
“At a time when free checking has become increasingly rare at large banks, it is still very prevalent among credit unions,” said Greg McBride, CFA, Bankrate.com’s chief financial analyst, in a statement.
But why are free checking accounts gradually disappearing from banks? McBride told Credit Union Journal the cost of providing free checking accounts was primarily underwritten by two revenue streams: debit card interchange income and overdraft fees. “New regulations enacted since the financial crisis have restricted how much revenue is being earned from both of these,” he said.
But McBride cautions that he does not expect free checking at banks to completely vanish. “After years of declining, there are signs of bottoming out,” he explained. “Plenty of smaller community banks and even some larger regional banks have, and will continue to offer, free checking accounts.”
Free checking wasn’t the only service the study examined. Credit union members are also likely to get a better when using out-of-network ATMs, with more than one-third (34%) of credit unions reporting they charge no fee when members go outside the network.
Credit unions also offer a slightly better deal on overdraft fees, averaging $27 compared to $33 at banks.
Among other findings:
- Not one of the credit unions evaluated require more than $100 to open an account and 66% have no minimum.
- Almost all (96%) of the credit unions surveyed impose surcharges on non-members for using their ATMs—the most common fee was $3, the same amount that banks charge.
- Only 38% of the credit union checking accounts surveyed pay interest—of those, the most common yield offered is 0.05%. Two of the surveyed credit unions, Star One CU, a $7.9-billion institution based in Sunnyvale, Calif., and State Employees CU, a $3-billion institution based in Albany, N.Y., offered exceptionally high yields of 0.25%.
