Here’s What a New Study Shows on Service Charges on Deposits

By CUToday.info10.08.2018

Credit unions and banks are moving in different directions when it comes to service charges on deposits, a new report reveals–and it may be costing credit unions when it comes to Millennials.

Credit unions’ total revenue for service charges on deposits soared 4.9% for the 12 months ending June 30, 2018, while during the same period total bank service charge revenue fell 1.7%.

The report indicates banks’ approach to deposit charges is winning over the most Millennial business.

The Moebs Services study, which covers business and consumer accounts, defines service charges as account fees, check cashing, overdrafts, penalties for early withdrawal, etc., but does not include swipe fees.

“Service charges for all financial institutions hit a low in 2014 at $40.2 billion, which was a 20% decrease from its peak in 2008 at $49.5 billion,” noted Michael Moebs, economist and CEO of Moebs Services. “Ninety-four percent of service charge revenue is generated by consumers, not businesses.”

The study shows CUs are “sticking to their knitting.”

“CUs go after the single account user by offering free checking and lower fee prices. They have a more traditional or old-fashion approach to deposit gathering, and it is paying off for them,” said Moebs. “CUs generate good revenue by driving higher transaction volumes.”

Measured as a percent of total assets, banks’ service charge revenue is 0.21%, while CUs’ revenue is nearly double at 0.43% of service charges to assets, the report shows.

“Banks take a different approach to depositors by emphasizing relationships,” continued Moebs. “Banks want multiple accounts per customer. Multiple account households allow the banks to use deposit balances, and not fees, to provide bottom line results.”

Millennials Hate Fees

The Moebs study found Millennials, more than any age group, hate fees.

“The banks’ relationship approach is winning in the hunt for Millennial users,” suggested Moebs. “Cross-sell measurements show the banks winning at 2.5 accounts per household, while CUs are at 1.1 accounts per households (CU cross-sell number excludes mandatory share accounts to be a member).

The Moebs study concludes that banks and credit unions are both “correct” in how each treat service charges on deposits.

“The best direction is for a financial institution to have both relationship-oriented deposit services and transaction-oriented deposit services. If balance can be achieved, then sales and order taking can co-exist,” Moebs told “Service charges on deposits will continue to diminish because the banks have substantially more deposit market share than credit unions. Yet, credit unions will erode more and more of the banks’ market share, since credit unions need fee income and can live with a single service user or household.”

Reprinted with permission from, a leading source of news and resources for credit union decision-makers.