The Life and Death of the $1 Monthly Fee
When Brooklyn Coop opened in 2001 we did not have checking accounts. All transactions passed through members’ savings accounts including direct deposit and bill payment. There was no fee associated with the savings account because that’s not how savings accounts are supposed to work, yet as the credit union grew its services — from checking to ATM cards to debit cards to online banking — a substantial amount of costs built up around the provision of these services. We encouraged members to open checking accounts which did incorporate a monthly fee, but there was little incentive to do so since the savings account was fully functional.
Then came the wake-up call. Over 2008-2010, watching the financial crisis and the drop in outside grant funding available for non-profits, I feared for Brooklyn Coop’s survival. We did not earn sufficient operating income and we were vulnerable. The decision to put on a $1 monthly fee for savings accounts was our effort to (1) share the costs of operating the credit union among all its members equally, and (2) encourage members to open checking accounts for their daily transactions.
Many, many people objected. They did not object to the principle that all members should help support the credit union. Mostly it seemed they objected that there was no alternative, that a person who simply wanted to save was penalized for doing so. We did try to soften the fee’s impact by exempting borrowers (who already support us significantly with interest income) and minors. However the reality that Brooklyn Coop’s account structure discouraged saving among its members remained a strong negative for many.
Finally, this spring, we were able to change it. Due to the enhanced services that made the checking accounts more desirable as well as increases in other fees and interest rates, in 2017 Brooklyn Coop earned over 90% of the income it needs to operate from its members.
This is a huge accomplishment and ought to mean a lot of peace of mind for members. Outside funding no longer determines whether BCoop will survive or fail. It does determine how quickly we grow, but we now know that we can continue to serve our existing members with or without philanthropic support.
So, this week, some of you noticed no more $1 fee on savings. Members who want a simple account that allows for a wide range of electronic transactions have the new option of basic checking account for $2.50 per month. However, those members that use BCoop for savings or for borrowing can simply stay with a entirely free savings account.
I’m curious to know your reactions so please feel free to comment below or send a message to info[a]brooklyn.coop.