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Is A Monthly Credit Union Fee Acceptable?

Poll QuestionArizona Federal Credit Union has caught a lot of flak for charging a $3 monthly membership fee.

With the exception of accounts for kids, every member has been assessed that fee since early 2013.

We talked to Steve Kelley, the credit union’s vice president of marketing, to see how this fee is working out.

He says fine.

But he acknowledges the credit union lost thousands of members. It’s down from 160,000 in December 2012 to today’s 134,000. But Kelley calls that a “net wash.”

Credit Union Journal reported that services per member at Arizona Federal Credit Union were up 2%; loan production, 44%; deposit balances, 13.8%; loan balances, 7.5%; and active checking account holders, 5%.

The major benefit members now receive for the fee is free credit monitoring, which they used to offer for $1.95 a month, he says.

And Kelley also noted the dividend amount it returns to members has increased. In 2012, Arizona Federal Credit Union paid $3 million back to qualifying members, for an average of $38.50, and in 2013 it paid $5 million, for an average of $55.

Some members with large deposits, such as in certificates of deposit, received a substantial sum, he said.

Still, this fee – which is unprecedented – hasn’t sat well with many credit union industry folks. They say it’s not in line with what credit unions are all about.

For example, Dennis Witherspoon, an associate professor of finance at Northwood University in Michigan and a former bank and credit union executive, told Credit Union Journal:

“What they are doing is treating this like a for-profit business, and they are chasing out those members that are not profitable. The credit union is saying we don’t want that kind of (unprofitable) member anymore. We just want members that we are going to make money off of. That goes against the grain of the credit union movement, which is to be there for all members regardless of financial wealth.”

The numbers as a whole do point to a loss in unprofitable, as well as nonactive, members.

In general, we’re not a big fan of banking fees. One of the reasons we stopped including credit unions on our CD Rates Leaderboard is that we felt the deposit requirement for joining some credit unions was too much and took away from CD earnings – even though that money is still yours.

But we want to know what you think.

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Would you pay a monthly service fee to join a credit union?
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