Metro Credit Union, a local financial institution, is one of the first in the area to announce the elimination of return fees to help consumers reduce or avoid overdraft fees. Describing the need to reduce the fee burden on consumers as, “the right thing to do,” Chief Executive Mike McDermott told the OWH that most studies on overdraft fees can be misleading. While many checking account studies show the average of overdraft fees to be $120 to $150 per year, the cost for many accountholders is likely much higher because the majority pay no overdraft fees. “For families struggling to make ends meet, it’s not uncommon to see overdraft fees every month,” said McDermott.
Citing costs for food, energy, and housing rising faster than wage growth, he expects the problem to get worse as more consumers run out of income to cover living expenses sooner in their paycheck cycle. Predictably, this will lead to more overdrawn accounts. According to McDermott, “The most meaningful way for us to benefit struggling families in the Metro area is to help them avoid fees.”
No Return Fees
To this end, the credit union will completely eliminate Return fees by March 10. Return fees are the service charges assessed when an item is returned to a merchant unpaid because the account has insufficient funds to cover the item. McDermott calls fees on returned items especially impactful for consumers because merchants typically charge their own fees when an item is returned to them.
But what about overdraft fees for items that are paid instead of returned to the merchant? Metro has a plan to reduce fees for paid items that bring the account to a negative balance as well. “We started to see family budgets getting stretched, and last year we began doing some things to reduce the number of fees charged,” said McDermott. Metro allowed checking accounts to be overdrawn by $10 without an overdraft fee, capped the number of fees consumers can be charged in a day, and gave consumers extra time to bring in deposits before incurring an overdraft on Debit Card purchases.
This March, Metro will go further. The credit union will increase the “no-overdraft fee” cushion on checking accounts from $10 to $50. According to McDermott, the credit union believes it can prevent a lot of overdraft charges by “letting account holders use $50 of Metro’s money at no cost, and free of overdraft fees.” Metro is also eliminating overdraft fees for items $5.00 or less regardless of account balance, to forever end the $37 cup of coffee.
Metro Credit Union
McDermott admits eliminating all of these fees will have a negative impact on Metro’s bottom line, but also understands the impact these fees have on a consumer’s bottom line. “It will definitely be felt in the short-term, but a lot of things have changed in financial services the last couple of years and not all of them have been good. In the end, this change is just the right thing to do.”
Read the original article from the Omaha World Herald.