Savers Should Watch Out for Fees at Both Banks and Credit Unions

As I mentioned on Monday, you can often find the best CD rates at credit unions. However, credit unions aren’t perfect. There are some credit unions that have fee policies that are even worse than the big banks. This Washington Post article highlights a recent study that shows credit unions are raising overdraft fees faster than banks. It should be noted that the overdraft fees are still lower on average at credit unions than at banks. Overdraft fees are rarely an issue for savers who are careful not to spend more than they have in their accounts. However, there are other fees that can be an issue for savers. And there are some credit unions that you do have to worry about these fees. I thought it would be helpful to point out a few of these credit unions.

One credit union charges a monthly fee just for being a member. It’s Arizona Federal Credit Union in Phoenix, and in January, it started to charge membership dues which charge most all adult members $3 per month. I did a review of this membership fee in April.

Another credit union with a type of membership fee is Dade County Federal Credit Union in Miami. Instead of calling the fee a membership fee, the credit union calls it a security fee. I noticed it when I was reviewing the credit union’s reward checking account. This reward checking account used to be a good deal, but the balance cap has fallen to $5,000. I also noticed this in the small print “Security Fee of $1.99 will be applied to account on a monthly basis.” This security fee is also mentioned for the other checking accounts. I did some searching for a history of this fee, and I found this 2011 FW thread in which one commenter mentioned “I was flat out told that the fee is required for all new accounts and that I would not be able to opt out.”

Fortunately, monthly membership fees are rare. One thing that’s more common is a monthly fee on checking accounts Fairwinds Credit Union in Central Florida ended its free checking account a couple of years ago. It now has potential monthly fees on its checking, savings and money market accounts unless members meet certain requirements. Most requirements are not that bad. For example, the $7.50 monthly fee on the Fair Checking can be avoided with a $500 average monthly balance. However, for savers these fees can hit you if you're not careful.

One Nevada Credit Union in Las Vegas also has monthly maintenance fees on its checking accounts. For the credit union’s One Checking Rewards, a $5 monthly fee is only waived for the first 90 days of account opening. For the One Checking, members need at least 15 debit card purchases or a $2,000 balance to avoid a $5 monthly fee.

Savers can typically avoid monthly maintenance fees without much problem by maintaining minimum balances. One type of fee that’s more likely to hit savers is an inactivity fee. I’ve been hit by inactivity fees by two credit unions. In addition to fees, account inactivity can also cause your accounts to be frozen which can be costly as I described last year.

The Washington Post article listed some reasons why some credit unions have been increasing fees. These include the low-interest-rate environment, high losses on loans during the recession and NCUA charges to cover losses on mortgage-backed securities by the corporate credit unions. It should be noted that many credit unions have avoided new and higher fees. It should also be noted that credit union members can vote for their board of directors who oversee management. That may help to pressure credit unions to maintain fee-friendly policies, but sometimes the easiest way to voice displeasure is to just close your accounts and move your money to another institution with more friendly fee policies.