Uw Credit Union Loan Rates – Eliseo Lacossier is shown at work in the UW Credit Union fish hatchery road section. The credit union announced in July that it would cut the remaining overdraft from $30 to $5.
In July, UW Credit Union announced it would lower its remaining overdraft fees from $30 to $5. “A common mistake members make is not giving their kids groceries or new shoes,” President and CEO Paul Kundert said in a news release announcing the change.
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The Madison credit union waived overdraft fees in 2010 for many common situations. The remaining commission has now been reduced from $30 to $5.
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In July, UW Credit Union announced it would lower its remaining overdraft fees from $30 to $5. “A common mistake members make is not giving their kids groceries or new shoes,” President and CEO Paul Kundert said in a news release announcing the change. James Gill
Eliseo Lacossier is shown at work in the UW Credit Union fish hatchery road section. The credit union announced in July that it would cut the remaining overdraft from $30 to $5. Courtesy of UW Credit Union
Those who spend more than they have in their checking account often pay higher prices. Average overdraft fees in the U.S. have been rising for decades, reaching a record high of $33 in 2020, according to a Bankrate survey.
For American banks, these fees are big business, bringing in billions each year. But in recent months, a handful of banks and credit unions have targeted those lucrative fees by reducing or eliminating penalties for customers who overdraft their accounts. In June, Ally Bank, the online bank with more than $180 billion in assets, announced it would waive overdraft fees for all of its accounts.
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Then, in July, Madison-based UW Credit Union made a similar move. In 2010, the credit union, which waived overdrafts for most common situations, announced it would drop its overdraft fees from $30 to $5 per event. The change is expected to save credit union members $2 million in 2022.
“A common mistake members make is not paying for groceries or a new pair of shoes for their child,” UW Credit Union President and CEO Paul Kundert said in a July 13 news release. “A careless overdraft can quickly turn into a financial crisis, causing a domino effect of stress and anxiety.”
While the agreement remains that members don’t have to overdraw their accounts, it’s easy to lose your balance or forget to deposit a check, Kundert said in an interview Friday. “Everyone makes mistakes…but only those with low balances pay the fines.”
Banks and credit unions approve such transactions until the account is overdrawn by $200 — effectively an extension of credit — unless the customer has a history of defaulting on the balance, he said. But people often don’t realize they’ve overdrawn their account until they’ve already written off $100 to $150 in excess debt.
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“It’s a big hurdle for them to overcome, but many do it because it means going without a bank account.”
According to an analysis by the Center for Responsible Lending, in 2019, US financial institutions charged more than $11.68 billion in overdraft fees, 84% of which were incurred by just 9% of account holders. Credit unions, as well as banks with $1 billion in assets, are not required to report this income to the Federal Deposit Insurance Commission, reducing overall costs. Average overdrafts of these banks have increased by more than 55% since 1998.
This isn’t the first time UW Credit Union has adjusted its overdraft policy. In 2009, after lobbying by consumer groups, the Federal Reserve announced new rules that bar banks and credit unions from charging overdraft fees for one-time debit card transactions and ATM withdrawals unless customers sign up. Banks and credit unions can automatically decline debit card transactions or checks that overdraw an account unless consumers opt out.
UW Credit Union responded to the new law by waiving overdraft fees for such transactions. It also added a policy that prevents members from incurring multiple overdraft fees in the same day or using overdrafts of $10 or less.
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The move didn’t come cheap: Kundertin said the changes resulted in $15 million to $18 million in “savings” for members. That is, the income of the credit union is very low.
As the November 2020 election nears, some analysts have predicted that President Joe Biden will further curtail the practice. “Overdraft fees are the biggest threat to the banking industry during a Biden presidency,” Nathan Dean, a senior analyst at Bloomberg Intelligence, told CNN Business in an October 2020 story.
Anticipating the possibility of more regulation, Kundert and his team took another look at the role of overdraft fees at UW Credit Union. “At a macro level, our fees are clearly the best in the country. But on a personal level, there are still people (they) who pay $30 when they are overpaid. It makes us ask, “Can we do better?” forced to say.
While banks and credit unions compete to offer better rates or rewards, overdraft fees are not competitive. That’s a sign of trouble in the market, Kundert said.
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“Personally, I think this is due to the lack of equal rights in the transaction. Overdrafts are paid by the poorest who have no power to manipulate the market to better serve them.
“At some point, either through regulatory action or market forces, these hefty overdraft fees should be eliminated. So I personally think we’re more forward-looking in terms of building a sustainable entity that provides these transactional services.”
According to Kundertin, UW Credit Union’s policy change is a “direct change” that does not change the criteria the credit union uses to determine when to allow a customer to overdraft an account.
Other financial institutions have offered other alternatives to large payments. PNC Bank has implemented a “low cash mode” that alerts customers when their balance drops below $50 and back below $0. Bank of America introduced a checking account called SafeBalance, which allows customers to spend only what they have, and a Balance Assist line of credit, which allows customers to borrow up to $500 for a $5 fee and pay it off in three monthly installments.
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Additionally, Summit Credit Union, based in Madison, allows members to set up an “overdraft,” a credit account from which money can be drawn if the member overdraws their checking account. Each such transaction costs $3, and if the client does not have funds in the additional account, the transaction costs $28. Summit members can avoid overdrafts entirely with a balance account that automatically rejects any transaction that exceeds the balance.
At UW Credit Union, Kundert expects the new change to reduce overdraft revenue by 84%, costing the credit union about $2 million, or 1.3% of projected revenue in 2022.
But he believes the credit union can recoup that amount by increasing employee productivity by 3%, and he’s optimistic about that. First, he expects the change to reduce the number of phone calls the credit union receives to about 30,000, with fewer calls asking about fees.
Work morale can be raised. “I think it’s a good place to work if you know you’re working somewhere that helps people and doesn’t put them at a disadvantage when they make a mistake,” Kundert said.
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The anonymous survey goes to 600 Dane County businesses and asks if their employees, managers and directors are African American. A sign at the counter at UW Credit Union’s Fishing Road branch informs members of their new status as Juntos Avanzamos (“Together We Advance”) for their dedication to serving Latino and immigrant members.
Kayla Arcos, a bilingual senior bank teller, and Sonia Castellanos, a teller, work at the drive-thru window at UW Credit Union on Fish Hatchery Road in Fitchburg.
At UW Credit Union on Fish Hatchery Road in Fitchburg, bank teller Jessica Ruiz laughs as she announces the birth of a baby in Spanish.
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After two decades of hiring bilingual staff and overcoming laws that exclude immigrants, UW Credit Union has gained national recognition for serving Latinos.
Kayla Arcos, a bilingual senior bank teller, and Sonya Castellanos, a teller, work at the drive-thru window at UW Credit Union on Fish Hatchery Road in Fitchburg. Ruthie
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