Overdraft Revenue Declines, Study Finds
Credit unions lost $1.4 billion in overdraft revenue in 2011 due to a bank-initiated overdraft price increase and the increasing popularity of alternative short-term loans, according to a new study from Lake Bluff, Ill.-based research firm Moebs Services.
The Moebs study said the national median overdraft price increased by $2.50 per transaction from June 2011 to November 2011, but credit unions did not contribute to the change. The median CU overdraft price remained steady at $25 per transaction during this time period, Moebs Services CEO Michael Moebs said. Meanwhile, banks’ median overdraft price is $30 per transaction, he said.
“We’re seeing credit unions sit on the sidelines of the overdraft business when they could be getting into it,” Moebs said. “If they lower their prices, the result will be an increase in checking account holders, which will raise their overall profitability.”
The study also found that the average number of overdrafts per household was 6.7 in 2011, an 18% decrease from 2010’s average and a 31% drop from the peak average in 2009. This demonstrates that consumers are not only reacting to higher priced overdrafts but are leaning toward alternative short-term lending solutions, Moebs said.