By the number: Credit Unions Are Relying More on Fee Income

Credit unions charge lower and fewer fees than banks, a fact touted by the industry's largest trade group in a survey released last week.

The results, based on responses from 1,114 credit unions, showed that far fewer credit unions than banks charge fees for such things as checking accounts, bounced checks, and credit cards.

Credit unions that do assess fees do so at much lower rates than banks - for example, an average of $3.59 versus $5.97 per month on regular checking accounts, the survey found.

What the survey didn't show is that fee income as a percentage of average assets is growing much more quickly at credit unions than at banks. So while the consumer is still seeing comparatively lower fees at credit unions, the institutions are relying much more on fee income than they did several years ago.

"We've seen the numbers creep up a bit in fee income," said Bill Connors, president of Callahan Financial Services, a Washington-based credit union consulting firm. "But in most cases where you see a fee, it's typically to recover costs that they have to pay, such as for ATM usage."

An American Banker study found that from 1992 to June 1995, fee income as a percentage of average assets increased by 18% on average at the 12,079 credit unions in the country. For banks during the same period, the percentage rose by just 3%.

Stock thrifts also posted a percentage increase of 18%, while at mutual thrifts fee income dropped as a percentage of assets by 14%, according to the study.

Despite the jump in fee income in the past three years, credit unions are still well behind banks in this area. As of June 1995, fee income accounted for 1.12% of banks' average assets, compared with just 0.44% for credit unions, according to the American Banker study.

At Arizona Central Credit Union in Phoenix, for example, that figure has jumped by more than 40% in the past three years. It's still low, just 0.85% of average assets, but it's rising steadily.

"I wouldn't say that we depend on it a lot more," said Stephen F. Gessel, senior vice president of finance at Arizona Central. "Our intent is to modify the behavior of individuals and discourage them from certain types of activity, such as ATM abuse."

On overdrafts, for example, the credit union charges $15, which seems high, Mr. Gessel said, but is not high enough to always deter such actions. Arizona Central also charges customers $1 for calling a service representative for information that could be obtained through the automated-voice system.

At South End Federal Credit Union in Boston, the percentage of fee income jumped to 4.99% of average assets, well above the industry norm and above that for most banks as well.

"We've had our financial difficulties, and that's one of the reasons why our fees have increased in recent years," said Marilyn V. Brower, manager of the $900,000-asset credit union. "But they've served their purpose and gotten us on firm footing, so we anticipate them going down again."

Still, the survey compiled by the Credit Union National Association and the Consumer Federation of America shows that credit unions are still the place to go for customers seeking the lowest fees.

For example, all banks charge a monthly fee on interest-bearing checking accounts, but only 46% of the credit unions surveyed do, according to the survey. Credit unions that do charge a fee, charge about 40% less on average than banks. The only area in which credit unions outstrip banks' fees is ATM use, for which more credit unions charge fees than banks.

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