Is “courtesy pay” really a courtesy? As long as I have been in credit unions, conventional wisdom has said there are only two reasons to charge a fee: to cover the cost of the service, and to change the negative behavior of the member.

For full disclosure, I will state that at Main Street Financial Federal Credit Union, we do offer a courtesy pay product and have for more than five years. Over this five-year period, we have seen increasing use of it and, of course, a corresponding increase in income. But we've also seen an increase in the amount of negative share draft accounts charged off. The arguments supporting courtesy pay are that members' usage shows their need for this product and that the loss of income, if restricted, would be detrimental to the safety and soundness of the credit unions offering it.

But both of these arguments contradict the two primary reasons for charging a fee (cover costs and change behavior). The income generated is far in excess of the cost of providing share drafts, and rather than an incentive to stop bad behavior, we are encouraging members to write checks or use debit cards when no funds are available.