On overdraft fees, credit unions may not be any gentler

Becky Yerak
Chicago Tribune

Credit unions have a reputation as kinder, gentler versions of banks, but a new study shows that there’s virtually no difference in what they charge consumers for overdrafts.

The median overdraft price on a checking account at a bank is $30, according to a 2015 study by Moebs Services. At credit unions, the median charge is $29, which Moebs considers a statistically insignificant difference. The last time the gap was so narrow was when it closed in 2007, when both types of institutions charged $25.

The median overdraft fee means half the charges are higher and half are lower.

In 2014, the median charges by banks and credit unions, respectively, were $30 and $28.50, Moebs said.

The 2015 study reviewed nearly 2,800 banks, thrifts and credit unions.

The federal Consumer Financial Protection Bureau has some tips for avoiding overdraft fees:

■Opt out of overdraft coverage. If you pay a lot of overdraft fees, consider opting out of overdraft coverage for debit purchases or ATM withdrawals. Without overdraft coverage, your card will be declined if you don’t have enough money in your account. You won’t be able to complete the transaction, but you won’t incur an overdraft fee, either. If you’ve opted into an overdraft program, you can change your mind any time. Just let your financial institution know, and it must honor your change request as soon as possible, the bureau said.

■Track your balance. To avoid overdraft fees and insufficient-funds fees, consider signing up for low-balance alerts. If you have regular electronic transfers, such as rent, mortgage payments or utility bills, make sure you know how much they will be and on what day they occur.

■Link to a savings account. If you overdraw your checking account, money will be taken from your savings account to cover the difference as long as you have enough money in your savings account. You may be charged a transfer fee, but it’s usually less than the overdraft fee.

■Get a credit line. As an alternative to a linked savings account, ask your bank or credit union if you’re eligible for a credit line or can link to a credit card. You might have to pay a fee when the credit line is tapped, and you might owe interest on the amount you borrowed, but it’s usually a cheaper way to cover a brief cash shortfall, the bureau says.