Moebs Study Urges CUs to Go Toe-to-Toe With Payday Lenders
If you’re going to overdraw your checking account by $100 or less, your most cost-effective bet is to borrow money from a payday lender, not to use an overdraft service or let your check bounce.
That’s the conclusion drawn from a recent study, “The Best & Worst Places for Overdrawing,” conducted by Lake Bluff, Ill.-based research firm Moebs Services. The study, which surveyed 1,240 banks, 1,292 credit unions and 832 major retailers. including Wal-Mart, Home Depot, Walgreens and Safeway, reveals the most costly way to overdraw a checking account is through a bank or credit union that does not offer an overdraft service. In this case, the institution will charge a median nonsufficient funds fee of $28 and the retailer that received the bad check will charge a median price of $30, bringing the total damage to $58.
“If a credit union truly wanted to serve its entire potential membership, why not act like a payday lender?” Moebs said. “Credit unions should go after the members who choose not to open a checking account because they’re afraid they will overdraw. If I were a credit union, I would get heavily into the overdraft business, go after the people with low FICO scores and lower my overdraft price.”
One credit union that understands the benefits of overdraft services is the $300 million City County CU of Fort Lauderdale based in Margate, Fla. Chris Oldag, executive vice president and chief operating officer, said approximately 70% of the CU’s membership uses its overdraft service. He pointed out that without overdraft coverage, members could spur a detrimental chain of events due to a returned check for a mortgage payment, auto payment or rent, for example.