HOUSTON — Unprecedented revenue pressure from increasing regulation will eliminate free checking at many credit unions this year. However, CUs should not charge a fee without giving members something extra in return.
That is the opinion of Strunk & Associates, which believes a package of services-including cash-back rewards cards-is what will make a checking fee palatable to members. "The whole premise, and we have done research, is we don't think consumers are opposed to spending $5 to $7 a month to save 50 cents a gallon at the gas pump and get identity theft protection," said CEO Mike Sobba.
While CUs will brand their own checking accounts, Strunk & Associates is calling the package Preferred Checking. It offers 20% cash back gift cards at Shell, BP, Exxon/Mobil, Home Depot, Lowes, Pizza Hut, Outback Steakhouse, Burger King, Old Navy, Olive Garden, Sears, Applebee's, Target, JC Penney, and other large well-known retailers. The consumer also gets $10,000 in AD&D insurance, ID theft restoration services, travel assistance services, and other travel, shopping, and entertainment discounts. Strunk & Associates is partnering with The Sisk Company, Fort Worth, Texas, on the package.
CUs, based on their size, will pay somewhere in the range of $1.25 a month per checking account for the program. Sobba believes CUs can charge between $2.50 to $7.50 a month for the new account. "At a minimum credit unions should be able to increase fee income by $40 per account per year depending on their marketplace and their appetite for fee income," Sobba said.
Sobba believes free checking will go away this year due to the proposed debit interchange rules, increasing losses CUs are suffering from the overdraft rules that kicked in Aug. 15, and as a result of NCUA eventually adopting the same guidelines as FDIC , which would require CUs later this year to aggressively monitor the use of overdraft to address overuse.
