Not All Growth Is Good
According to a recent Wall Street Journal article (‘Free’ Checking Costs More, 9/24/12), “free” checking accounts are on the decline. The article cites a Bankrate survey of banks indicating that just 39% of non-interest checking accounts are free to all customers, down from a peak of 76% just a few years ago in 2009. Banks have increased minimum balance requirements, overdraft charges and monthly service fees. They have also increased ATM surcharges. According to the banks, the increase in fees is needed to offset the stagnating economy and new regulatory burdens.
Credit unions, too, are operating in the same environment. Low interest rates, lackluster loan demand, and increased regulatory burden are squeezing credit union earnings. The increase in “free” checking fees at banks may drive more of their customers to credit unions. If this happens, it would be a mistake for credit unions to assume that growth in checking accounts naturally leads to increased profitability. It will remain important to understand what other products new members are using and the number of transactions they are performing. Additionally, threats to interchange income and overdraft fees remain and could change the profitability of checking accounts in the future. In the end, credit unions need to stay focused on growth in the target market. Not all growth is good, not even when it comes from checking accounts.
