Pricing Combinations That Work–And Don't Work

LAKE FOREST, Ill.—A new study reveals financial institutions that offer a high overdraft fee and no free checking are at risk of losing accounts—especially younger consumers.


The report from Moebs $ervices also shows community banks with assets below $100 million and large credit unions of more than $5 billion are the only groups least at risk for this checking runoff—with a strong percentage of both groups offering free checking and a low overdraft fee.

The report comes on the heels of another Moebs study that reveals 61.4% of all depositories now lack free checking.

Land Lines & Snail Mail

“As banks, thrifts and credit unions rush to get fully into relationship pricing to offset the fintech firms lead by Walmart, they are forgetting the basics of financial service marketing,” said Michael Moebs, economist and CEO at Moebs $ervices. “Gen Zs will soon start to leave their teenage years, and Millennials need a startup financial service. Young people want a basic bare bones checking account with no or low fees, yet only the larger credit unions are seeing this, along with consumer-oriented community banks. If you think Gen Zs still use land lines and snail mail, then de-brand free checking and charge more than $30 for an overdraft.”

Moebs said consumers want checking with no fees, no balance requirements, no conditions, no rewards and no relationship.

“Only 13.3% of all depositories offer checking accounts meeting these criteria,” said Moebs.

What Analysis Sought to Do

The Moebs’ analysis identified depositories that offered free checking as well as an overdraft fee less than the national median overdraft price of $30.

“FIs discovered in this latest survey meeting these criteria got our attention,” according to Moebs Moebs.

Getting that attention, according to Moebs, were two groups that stood out in the survey: community banks with assets less than $100 million and a median OD price of $25, of which 29.3% offered free checking; and large credit unions greater than $5 billion in assets with a median OD price of $28, of which 69.1% offer free


Michael Moebs


“Every other group either offered OD prices of $30 or more and no free checking,” noted Moebs. 

What Began With BofA

The Moebs Survey results show low overdraft price is a factor in gaining more consumers and additional net revenue at banks and credit unions in the smaller asset size peer groups. The median OD price of depositories greater than $25 billion in assets is $35 and very few of those offer free checking, said Moebs.

“Most of these FIs have been shedding consumer checking accounts since 2013 when Bank of America dropped free checking, restricted overdraft services and increased their OD price,” he said. “Free checking can help increase more checking accounts and produce more revenue. Of the largest FIs, those over $25 billion in assets, only 0.1% offer free checking. Yet, free checking will not work unless fees, especially overdraft fees, are low.”

High overdraft price and no free checking is not what the American consumer wants, especially Gen Zs and Millennials, emphasized Moebs.

A ‘Definite’ Direction

Moebs noted the “definite” checking direction of financial institutions in 2019 is toward selling several services and developing relationships.

“Yet, our survey and research shows the old Wall Street axiom is true: when everyone is selling—buy,” said Moebs. “Those with low fees and a simple, efficient, singular approach will gain in revenue and carve out a position of trust with the consumer—especially with Millennials and Gen Z.”

Section: Standard
Word Count: 767
Copyright Holder:
Copyright Year: 2019
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