COLUMBUS, Ohio-Increasing fees being charged by banks should present an opportunity for credit unions to capture share, but some are facing an ironic dilemma: the pressure many credit unions are feeling to raise their own fees.
Analysts told Credit Union Journal it's no secret banks have looked to increase fees, in some cases significant increases, to boost earnings, and widespread media reports have alerted consumers to these deeper reaches into their pocketbooks. That would seem to well position credit unions to turn customers into members. Yet many credit unions have also had to reexamine their own fee structures.
Paul Hixon, VP-marketing and communications for Corporate One FCU, who spoke to Credit Union Journal on behalf of Alliance One, its ATM network, said rising bank fees allows credit unions to polish up the white hat-even if they do end up raising their own fees a little bit.
"Banks are needing to supplement their earnings, as many of them have been hit hard by the economic downturn and the collapse of the housing market," he said. "They are most certainly going to look to fees to supplement their income. Credit unions have not been affected in the same way as banks, so there is a great opportunity for them to-once again-be the good guys and not gouge their members with exorbitant fees."
Hixon noted that the fee increases by banks does provide CUs with a certain amount of cushion to raise their own fees while still remaining well below competitors. "Credit unions typically are very judicious when it comes to raising fees, only raising them to keep up with technology," he added.
Tun Wai, NAFCU's director of research and chief economist, said that, "in general, credit unions do not normally raise their fees as quickly as banks do. They recognize that affects their membership. On the bank side, it's the cost of doing business-that's the way they look at it. Credit unions don't look at it that way."
With real estate loans increasing at credit unions, partly as the result of other mortgage lenders shuttering operations, Wai noted CUs may be earning more fee income from such loans, stressing it's not the result of fee increases, but additional volume.
Mike Schenk, CUNA VP-economics and statistics, similarly, is not projecting big increase in fees by credit unions. "We don't have real-time data on fees that are being charged, but if I look at fee income numbers, the fee income/average assets figure has not changed very dramatically," he offered. "Just anecdotally, from people I talk to, most are saying they are trying to away from increasing fees and it appears from what I can tell that most are using the high levels of capital that they already have to support members and/or allowing net income to fall."
According to a recent fees study conducted in 2008 by CUNA and another fee study in 2006, credit unions are finding ways to keep their fees low. "By and large, fees did not change much from 2006 to 2008 and those that did go up only went up slightly," said Beth Soltis, senior research analyst.
Looking at ATM and check card fees-although the fees themselves stayed the same-CUs were less likely in 2008 than in 2006 to charge members a per-transaction fee on non-owned ATMs, 52% vs. 62%, Soltis said. In addition, the percentage of CUs allowing a certain number of free transactions before assessing a per-transaction fee increased to 83% in 2008 from 64% in 2006.
"Similarly, while online bill-payment fees were stagnant, credit unions are less likely to charge for this service-21% or credit unions charge members to use online bill-payment compared with 33% in 2006."
However, Bill Handel, VP of research and development for Raddon Financial Group, Oak Brook, Ill., said expects to find a "a mixed bag" when it comes to credit union fees.
"In many markets there are some opportunities to raise fees and still not be close to bank fees," he noted. "We're seeing it happen already, and we're expecting to see it more in 2009."
Some credit unions may look at how some banks handle NSF fees and decide to follow suit, Handel suggested. Some banks charge a small fee for the first NSF violation, then a higher amount for up to five NSF violations, and an even higher fee for those above 10.
"Banks are looking for more creative approaches," he said. "Credit unions are going to have to be a little more creative, too."
Banks have also begun quietly hiking fees on various affinity credit card programs, such as those that offer cash back or airline mileage points, Handel noted. But for regular credit card annual fees, "you would find banks would stay away from it," he said. "Keep fees in places where there is perceived value. Credit unions should be doing the same thing."
For more information
www.corporateone.coop;
www.allianceone.coop;
www.nafcu.org;
www.cuna.org, www.raddon.com
