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UW Credit Union, based in Madison, Wis., said Tuesday that it will immediately cut its overdraft and nonsufficient funds fees by more than 80%.
In a move that has been rarely been seen in the credit union industry, UW Credit Union ($4.5 billion in assets, 296,580 members) announced that it has cut the overdraft (OD) and nonsufficient funds (NSF) fees from $30 per occurrence to $5. The immediate policy shift was due to the credit union's goal of creating a more equitable banking experience for everyone, while also supporting the financially vulnerable.
According to the announcement by the credit union, the annual number of NSF/OD fees UW Credit Union charges is low by industry standards, with 8% of its nearly 300,000 members paying one or more NSF/OD fees per year, with an average of nearly four fees per year. The new policy could save these members approximately $100 annually. For some, the actual amount will be much higher.
"Everyone comes up short sometimes," UW Credit Union President/CEO Paul Kundert said. "From a student managing their first bank account to families who lose track of their current balance, our goal for all members is to help them accumulate wealth, not erode it. While some fee is necessary to discourage behaviors that may harm local businesses and other members, it should be reasonable and applied equitably."
In a statement, the credit union said the average NSF/OD fee in the U.S. was more than $33 in 2020, up from $30 in 2010, according to Bankrate.com. UW Credit Union's new, industry-low fee applies to all accounts, including checking, savings and money market transactions. According to UW Credit Union, it will continue to provide a (-)$10 threshold, under which no fees will be charged, as well as limit fees to a maximum of one per day. UW Credit Union eliminated overdraft fees related to everyday debit card purchases and ATM withdrawals in 2010.
According to The FinHealth Spend Report 2021, low- to moderate-income (LMI) households are nearly twice as likely to overdraft than non-LMI households.
"Aggressive penalty charges are part of the reason that so many community members are unbanked or underbanked," Constance Alberts, Bank On Greater Milwaukee's program manager, said. "Overdraft policy changes that include significant fee reductions or the elimination of fees can make a big difference. Equally important is that financial institutions work as partners to their members, providing real-time support and safeguards to avoid fees in the first place. People need more transparency, more resources and more touch points to help them take more ownership of their finances."
With industry overdraft revenue climbing upward of $31 billion, according to financial data firm Moebs Services Inc., reducing this income is long overdue, UW Credit Union said in a statement. Actionable fee prevention efforts may help bolster these policy changes.
In 2018, the credit union introduced its Clear, Launch and Encore accounts for individuals who prefer to have no overdraft-related fees. All transactions that could cause an overdraft are returned unpaid, free of charge. Today, 25% to 30% of all new accounts opened are one of those account types, according to UW Credit Union.
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Michael Ogden
Editor-in-Chief at CU Times. To connect, email at [email protected]. As Editor-in-Chief of CU Times since 2016, Michael Ogden has led the editorial team in all aspects of content strategy and execution, including the creation of the publication’s exclusive and proprietary research database of the credit union industry’s economic landscape. Under Michael’s leadership, CU Times has successfully shifted to an all-digital editorial product with new focuses on the payments, fraud, lending and regulatory beats. Most recently, he introduced a data-focused editorial product for subscribers that breaks down credit union issues into hard data, allowing for a deeper and more factual narrative for readers. In 2024, he launched the "Shared Accounts With CU Times" podcast, which offers a fresh, inside-the-newsroom perspective through interviews with leaders from the credit union industry and the regulatory world. He dives into pressing credit union issues, while revealing the personalities working behind-the-scenes to push the credit union world forward. His background includes years as a radio and TV anchor/reporter and a public relations and digital/social media manager, where he covered the food and music industries, as well as cooperatives and credit unions. Over the years, he has launched numerous exclusive video and podcast series, including a successful series of interactive backstage interviews with musicians at music festivals, showcasing his social media and live streaming production skills.
