Credit Union introduces charges for deposits and withdrawals from share account

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The_Banker

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I received an email last week from my Credit Union advising that from Feb 1st 2021 they are introducing charges.

If you deposit or withdraw money you will be subject to a €1 charge per transaction (there is no charge for loan repayments). The option of paying €4 a month (€48 a year) allows you to do as many transactions a month as you like.

These charges are applied regardless of whether its on line or over the counter.
Seems a little high to me. Are any posters aware of this happening at their credit union?

I think this will cause issues for the grand parents who put a fiver a week/month away for each grand kid. I know that is a popular form of saving where I live.
I’d be interested to know if this is happening anywhere else.
 
To add to the post above.. (as I hit submit to quickly- can’t seem to edit)

I know that credit unions are introducing a current account and that the charge is €4 a month but if you opt not to go with the current account you will still pay the €1 charge.

In addition, while students and under 18s are free from charges it isn’t clear if a parent/grandparent transferring money to a child (via savings transfer) will be subject to the fee.
 
The_Banker said:
These charges are applied regardless of whether its on line or over the counter.
Seems a little high to me. Are any posters aware of this happening at their credit union?
Click to expand...

Not at all strange. With very low interest rates and low inflation banks and credit unions make very little money from taking deposits, and can even lose money.

They have to introduce charges to cover their costs. Banks are doing it too.
 
NoRegretsCoyote said:
Not at all strange. With very low interest rates and low inflation banks and credit unions make very little money from taking deposits, and can even lose money.

They have to introduce charges to cover their costs. Banks are doing it too.
Click to expand...

I agree the CU’s may be losing money but €1 to deposit or withdraw money?
Seems to me that they are using this high charge to push people towards their new current account.

Maybe CU customers will be happy to move to this new current account for €48 a year but traditionally CU customers like the CU because they are exactly that.... Credit Unions and not banks.
If the CU movement try to take on the two main banks for current accounts I can’t see them winning a significant amount of customers. Maybe I’m wrong.
I’m coming up on 51 and my mother opened an account for me in Ballyphehane Credit Union when I was two weeks old. Ballyphehane was always a big player in the Cork Credit Union scene so took over or merged with Kinsale, The South Parish, Turners Cross and Dillons Cross Credit Unions and became First South.
There used to be a slogan on the wall of the Ballyphehane office saying “not for profit, but for service” but I think that may be changing.
I have a bank current account and other bank accounts with on line but I have always maintained my Credit Union account as I liked the way I could borrow and pay back over the set amount.. I’ve set up accounts for my kids..

Maybe times are just changing and the CUs are modernising and maybe that’s good. I just liked it the way it was !!!
 
The_Banker said:
Maybe CU customers will be happy to move to this new current account for €48 a year but traditionally CU customers like the CU because they are exactly that.... Credit Unions and not banks.
Click to expand...
You have a funny choice of username so :)

You used to "pay fees " tp the credit union via the fact that they paid a low dividend and inflation would eat away at savings.

But with market rates and inflation at zero it's just a different set of arithmetic.

I don't know enough to judge whether the mentality has changed inside the CUs, but I know the outside world has.
 
If theses fees roll out nationwide my guess will be many will take there savings out of them and hoard cash at home.
The €1 per transaction seems high though
 
NoRegretsCoyote said:
You have a funny choice of username so :)

You used to "pay fees " tp the credit union via the fact that they paid a low dividend and inflation would eat away at savings.

But with market rates and inflation at zero it's just a different set of arithmetic.

I don't know enough to judge whether the mentality has changed inside the CUs, but I know the outside world has.
Click to expand...
Given to me by sarcastic friends burned from listening to my betting tips
 
The_Banker said:
I received an email last week from my Credit Union advising that from Feb 1st 2021 they are introducing charges.

If you deposit or withdraw money you will be subject to a €1 charge per transaction (there is no charge for loan repayments). The option of paying €4 a month (€48 a year) allows you to do as many transactions a month as you like.

These charges are applied regardless of whether its on line or over the counter.
Seems a little high to me. Are any posters aware of this happening at their credit union?

I think this will cause issues for the grand parents who put a fiver a week/month away for each grand kid. I know that is a popular form of saving where I live.
I’d be interested to know if this is happening anywhere else.
Click to expand...

I've never come across that before. I could never understand why credit unions were bothering with current accounts - the level of switching between the banks seems non-existent so starting from scratch in a market that has two massive players, and where credit unions have no experience/reputation, seems like a bit of a strategic misstep. I can't imagine it was cheap to set up current account infrastructure.

Your credit union seems to be using an extortionate transactional charge to make you get a current account with them. I'm not sure this is a very wise long term position to take. Assuming they are a typical credit union they'll have about 25% of the assets out in loans leaving ~75% of the membership without loans. How many of these are bothered with the hassle of closing their current account with their bank to open a current account with their CU? Most people see them as different things anyway. My guess is many will just close their accounts and a big group of potential future borrowers will be gone forever.

Did they try return savings to members? If this is to address the capital and negative interest risks arising from excess savings it seems wide of the mark so you'd have to conclude it is a ruse to force members to open current accounts.
 
24601 said:
I could never understand why credit unions were bothering with current accounts - the level of switching between the banks seems non-existent so starting from scratch in a market that has two massive players, and where credit unions have no experience/reputation, seems like a bit of a strategic misstep. I can't imagine it was cheap to set up current account infrastructure.
Click to expand...

I can only speculate but it may have been driven by demand from the hundreds of thousands of customers who only have a CU account.

25 years ago many people were paid in cash and lived in cash, the CU was a place for saving and borrowing.

Nowadays almost everyone is paid by bank transfer, and more and more welfare payments are done that way too. Bill payment by direct debit is all the utility companies want too. You need a current account for this.

Maybe CUs were afraid that if they didn't offer current accounts then people would leave for the banks and never come back.
 
NoRegretsCoyote said:
I can only speculate but it may have been driven by demand from the hundreds of thousands of customers who only have a CU account.

25 years ago many people were paid in cash and lived in cash, the CU was a place for saving and borrowing.

Nowadays almost everyone is paid by bank transfer, and more and more welfare payments are done that way too. Bill payment by direct debit is all the utility companies want too. You need a current account for this.

Maybe CUs were afraid that if they didn't offer current accounts then people would leave for the banks and never come back.
Click to expand...

Are there really hundreds of thousands of people that only have CU accounts? I doubt the demand is there. I think the OP's credit union is probably illustrative of that. They probably introduced current accounts after huge capital outlay with no uptake and now feel like they have to push them to justify the decision.

Also, many credit unions have offered direct debit services for years without current accounts so that's not correct. CUSOP was set up by the League a good while back to facilitate the offering of electronic services and all of this was done outside the infrastructure of current accounts until very recently anyway.

Your last point is interesting though. If credit unions think they can compete with banks for all banking services they're mistaken. They should focus on what they were historically good at and become lean, local lenders. All this arsing around with current accounts and debit cards will only lead to an accelerated decline. The likes of Revolut & N26 can and will render them obsolete for such services overnight. They should shrink their balance sheets and put all their energies into increasing their market share of the personal loans market with some diversification into other lending types where appropriate.
 
24601 said:
Are there really hundreds of thousands of people that only have CU accounts?
Click to expand...

There are about 3.5m adults in Ireland. I read a statistic years ago (that I can't track down) saying that something like 20% are "unbanked" by international standards. However the common explanation given was that many of these people have CU accounts.

So maybe only low hundreds of thousands but still a lot of people.

24601 said:
Your last point is interesting though. If credit unions think they can compete with banks for all banking services they're mistaken. They should focus on what they were historically good at and become lean, local lenders. All this arsing around with current accounts and debit cards will only lead to an accelerated decline. The likes of Revolut & N26 can and will render them obsolete for such services overnight. They should shrink their balance sheets and put all their energies into increasing their market share of the personal loans market with some diversification into other lending types where appropriate.
Click to expand...

Agree 100%. Not even a large CU will ever produce as slick or functional a product as the Revolut app. But people will always need loans.
 
A tie up with revolut to offer their current account to cu customers would be probably a cost effective way to go.
So instead they will offer an inferior product at a greater cost.
 
The Irish Times is reporting the story.

www.irishtimes.com

Cork credit union set to impose charge on savings

First South to introduce €1 charge on deposits following widespread limits on the level of savings
www.irishtimes.com www.irishtimes.com

Explaining the decision, George Cantwell, chief executive of First South Credit Union, said that it is a direct result of changes over the past five years in the financial landscape, which has impacted on the credit union’s business model.
“The world has changed very significantly,” Mr Cantwell said, pointing to the difficulty in getting a return on investments, coupled with negative rates.
He said that the “vast majority” of banks now charge negative rates on short-term deposits to the credit union sector, with rates ranging from about -0.65 per cent to -1.0 per cent. This means that savings of €10,000 will cost the credit union up to €100 to place on deposit with a bank.

“Savings are very,very expensive for credit unions,” Mr Cantwell said.
 
Pinoy adventure said:
Surely the 200k loss is not directly from the 200+ million in assest and bank charges on it ?
Click to expand...
They've 185m in cash / investments. An average negative rate of just 0.1% is 185,000

They'll have increased bad debts this year due to Covid, but a negative return on cash definitely doesn't help.
 
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