Salal has joined the growing number of financial institutions that recognize the difficulties that fees can place on their members.
Matt Vance, First Vice President, Marketing & Product Strategy
Overdraft fees have long been a thorn in the side of consumers. They occur when you make a transaction that exceeds the available balance in your account, leading the financial institution to cover the shortfall in funds, and charge what can be a substantial fee. But at Salal Credit Union, we no longer charge our members for things like non-sufficient funds (NSF). In September 2023, we said goodbye to overdraft transfer fees altogether.
Lower-Income Customers Suffer Most from Overdraft Fees
There are several reasons we took steps to eliminate these fees. One of the more troublesome aspects of overdraft fees is that they disproportionately affect those who can least afford them. Low-income individuals and families are more likely to live on tight budgets and have lower account balances that make them vulnerable to overdraft fees. Being charged these fees can push already struggling households deeper into debt and perpetuate the cycle of financial hardship. Instead of worrying about falling behind because of overdraft charges, our members can focus on saving, budgeting, and achieving their financial goals.
Salal is committed to financial fairness and empowering our members. Rather than penalizing members for accidental overdrafts, we’re now able to put even more effort into providing the support and resources to help them manage their finances and achieve their financial goals more effectively. Our mission is to serve our members’ best interests, not to maximize profits for shareholders. With the removal of NSF and overdraft fees, we’re better able to prioritize the financial well-being of our members and help them build a more secure future.
Changing Times for Overdraft and NSF Fees
Thankfully, the financial industry has implemented significant changes to these fee practices over the past few years. Banks have now reduced their overall reliance on overdraft and NSF fee revenue by nearly 50% compared to pre-pandemic levels. And Salal has joined the ranks of nearly two-thirds of banks and one-fourth of credit unions that have fully eliminated NSF fees. The Consumer Financial Protection Bureau (CFPB) is also working toward a crackdown on the predatory fees that continue to exist across the industry.
A California law passed in 2022 requiring all California-chartered financial institutions to report their overdraft and NSF fee income revealed that the state’s credit unions are more reliant on this fee income than banks are. California-chartered credit unions received $183.1 million in overdraft fees in 2022, which is more than five times the $35.1 million that California-chartered banks reported. Credit unions in California also took in $69.6 million in NSF fees during 2022 compared to just $38.2 million for banks.
Some credit unions reported that over 15% of their annual income in 2022 came from NSF and overdraft fees. This isn’t surprising considering that credit unions tend to work with underserved communities who are in the early stages of managing their finances, and it is a welcome development that there is a larger industry conversation occurring. It’s clear that these fees run counter to the mission of credit unions like Salal. Consumers can take comfort in the fact that many credit unions are no longer charging the fees, and that there has been such a significant shift in the industry’s perspective surrounding these types of penalties.
Beyond Fees: Salal’s Member Focus
Salal Credit Union’s emphasis on community engagement and member education fosters a culture of financial responsibility. Beyond simply eliminating fees that might make banking services less accessible, we provide workshops, seminars, and outreach programs to promote financial literacy that empower our communities to bank with confidence and cultivate empowered lives.
Salal operates with a member-focused and risk-averse directive. Our members trust us to help them make the most with their money while avoiding potential pitfalls they may encounter with other financial institutions. Reach out today to see how we can help you secure your financial future.
