There are four things credit unions can do if they want to earn more from checking accounts and brace for more competition, Moebs said.

Get real about who the competition is. "The credit union's competition is no longer other credit unions, which is what well over half the credit union managements think it is," Moebs said. "The first thing credit unions have to be thinking is their major competition is Walmart and Apple, because their costs are lower, and they don't want balances and they can make money."
Charge $20 or less for overdraft. "Here the credit unions are making a huge mistake. They are now matched with the banks and the thrifts at a $30 median price. They can't do that," Moebs warned. Credit unions should charge less than $20 to remain competitive with the Walmarts of the world, he added. "We have worked with credit unions under $10 billion to lower their prices, and guess what? They make more revenue and they have happier members."
If free checking is a must-have, then emphasize interchange fee growth. The Durbin Amendment to Dodd-Frank caps debit interchange fees for institutions above $10 billion in assets. "The vast majority of credit unions, all of those under $10 billion, can make 43 cents on each one of their transactions, and that places them at a competitive advantage in relationship to other banks and even the big credit unions," Moebs noted.
Cut operating costs. Snatching a checking account away from a megabank that has abandoned free checking may sound like a good thing, but if the costs of maintaining that checking account are high, credit unions could be shooting themselves in the foot, Moebs warned. The key is to keep the annual cost of a checking account under $200, he said. "Even with free checking, you can make checking profitable."

Instant Insights /

Credit Unions Shift Checking Account Strategy

Related Stories

Recommended For You