Banks vs. Credit Unions: Fees – where does my money go?

Written by Christina Miller
Edited by Carly Simon-Gersuk

Recent reports show that banks have raised fees like overdraft and out-of-network ATM fees to record levels. According to Bankrate’s annual checking survey, which includes the 10 largest banks in the largest markets in the country, banks have raised the average fee for using an out-of-network ATM to a record high of $4.72 per transaction (1). This represents an average 4.25% increase annually over the past 21 years. With bank fees consistently rising year after year, credit unions provide the ideal solution. Unlike for-profit banks, credit unions are not-for-profit, which means any profits garnered are returned to the members in the form of better rates and lower fees.

“A lot of things in life go up,” says Bankrate’s Senior Vice President and Chief Financial Analyst, Greg McBride. “Laundry detergent goes up, but no one complains about it.” It is frustrating, however, when essential banking services like ATM fees increase at a much faster rate than inflation, which averaged 2.3% in 2019 (2).

At $33.36, the average bank overdraft fee falls just two cents less than the all-time high in 2017 (1). In contrast to ever-increasing bank fees, the average credit union overdraft fee in 2019 was $26 (3). This is about 25% lower than the bank overdraft fee — a substantial difference for your wallet.

All told, the average fee for using an out-of-network ATM has vaulted over 23% the past five years. Using an ATM that’s not affiliated with your bank will usually lead to two fees. One is charged by your lender; the other is charged by the owner of the ATM. That’s the fee that’s risen most consistently and at a faster rate, McBride said.

The average ATM fees vary across the markets in Bankrate’s survey on 10 banks and thrifts in 25 large U.S. markets. The 2019 survey shows that Houston, TX had the highest average ATM fee for user’s outside their bank’s network at $5.58 per transaction. Los Angeles, CA had the lowest average at $4.15.

Sarah Grotta, director of debit and alternative products of advisory service at the Mercator Advisory Group, says she thinks owners and operators of ATMs rely on the surcharge income to operate those ATMs. “Those ATMs may be seeing fewer customers, and so on a per-transaction basis they may be raising the fees to make up for the fact that fewer customers are actually paying the surcharge.” (1) Consumers are less likely to be taken advantage of in this way at a credit union, due to the not-for-profit business model. Additionally, many credit unions are part of the CO-OP Network ATM; this means you can access your accounts nationwide at any credit union location within the shared branch network just as if you were at your home credit union.

Checking account fees have been increasing as lenders adjust to federal banking laws and regulations enacted after the 2008 financial crisis. Among the changes: limits on when banks can charge overdraft fees on ATM and debit card transactions, and a reduction in the fees that banks charge merchants for each customer who uses credit or debit cards for their purchases.

Lenders have responded by hiking overdraft and ATM fees, as well as increasing how much money customers must maintain in the bank to avoid checking account fees. “I expect fees to continue increasing in years to come, but at a modest pace consistent with what we saw this year, just as was the case prior to the onset of these regulations,” said Greg McBride. The largest U.S. banks all offered free checking with no strings attached until 2009, when the share of all non-interest checking accounts that were free peaked at 76%, according to Bankrate. It’s now at 42%, the highest percentage since 2011.

Even so, consumers looking for checking accounts without monthly fees have plenty of options. Many credit unions, smaller community banks and online banks offer no-strings checking accounts. Many banks that do charge a monthly fee will often waive it if the account holder has their paycheck deposited directly into the account.

While recent surveys have found fees for checking accounts are no longer on the rise at banks, Bankrate’s advice to consumers is to simply “plan ahead” in order to avoid certain account fees. Certain unforeseeable circumstances do arise of course, so by being a member of an institution with lower fees, your wallet won’t be hit so hard when you do accidentally overdraft or when you need cash, but can’t easily get to your institution’s ATM. However, to avoid checking fees altogether, credit unions are still the best bet, as free checking is the rule rather than the exception.

Despite the increased fees, here are three ways savvy customers can avoid them altogether.

1. Use your bank’s website to find fee-free ATMs or, if available, get cash back at the register when using a debit card to shop.
2. Avoiding overdrafts is a matter of keeping tabs on your available checking account balance, something that’s easier than ever with mobile banking apps.
3. You can also sign up for email or text alerts if your balance gets below a certain level.


Written by Christina Miller
Edited by Carly Simon-Gersuk



1., 2019,
2. Bureau of Labor Statistics, 2020,
3., 2020,,do%20not%20charge%20overdraft%20fees