Overdraft sign
Credit unions made an extra $500 million in overdraft revenue last year, but banks and thrifts made about $400 million less, according to new data from financial institutions analytics company Moebs Services.
The number of overdraft transactions spiked by 2.3% at credit unions, but the number of overdraft transactions fell 7.3% at banks and 2.2% at thrifts, the company reported. However, overdraft prices for banks, thrifts and credit unions generally stayed the same year over year, it said.
The result was that for the year ending Sept. 30, 2018, overall overdraft revenue for banks, thrifts and credit unions hit $34.3 billion, up $100 million or 0.30% from the prior year.
"The uniqueness of this OD increase is revenue is up while transaction count down," Moebs Services Economist and CEO Michael Moebs said. "This implies either prices are up at many FIs, yet we don't see this reflected in OD prices, which are still at a median fee price of $30, or overdraft limits on the checking accounts are much higher. Yet once again limits appear stable in a range of $300 to $500, where they've been since 1998."
Increases in the number of open checking accounts may be a factor, the study noted.
The total number of checking accounts dropped from about 690 million to just over 600 million from 2011 to 2017 – a 12% decline over six years, according to a prior Moebs Services study. But this new study, which Moebs said used FDIC, OCC, Federal Reserve and NCUA data, reported that checking accounts increased 2.1% for the 12 months ending Sept. 30, 2018.
"This is the largest increase in checking accounts since the second quarter of 2013, or more than five years ago," Moebs said. There are almost 359 million consumer checking accounts, the study noted.
Moebs Services predicted that many financial institutions will lower their overdraft prices in 2019 in order to avoid volume declines. It also said it expected overdraft limits to increase in order to stimulate overdraft volume.
The new data on overdraft revenue follows a previous Moebs Services study out last fall, which found that credit unions were earning more monthly service charge revenue per member checking account than banks and thrifts were.
The Lake Forest, Ill.-based firm said members paid $12.90 per month on average in service charges on checking accounts at credit unions, compared to $8.95 a month at banks and $3.52 per month at thrifts. The overall average was $9.06. That data included account maintenance fees, minimum balance fees, overdrafts, ATM charges and other regular service fees; it did not include debit card swipe fees.
Service charges on deposits fell 1.7% at banks during the 12 months ending June 30, but they rose 4.9% at credit unions, it also found.
The company also reported checking account balances at credit unions had spiked 3% during the 12 months ending June 30, 2018, but checking account balances at banks had dropped 1.8% over the same period.
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