Interchange Income Drives Non-Interest Income

Callahan & Associates’ mid-year 2007 Non Interest Income Survey reveals changes in the composition of this important revenue stream.


Last week, Bellco Credit Union ($1.6B, Greenwood Village, CO) announced that it would eliminate all transaction fees at their own ATMs. This decision, which applies for all using the ATMs, including non-members, largely results from Bank of America’s decision to increase the foreign ATM fee from $2 to $3. CO-OP has also been advertising their network of surcharge free ATMs on national platforms, such as the USA Today. Increased recognition to the importance of non-interest income while balancing member interests sets the context for Callahan & Associates’ Non-interest Income Survey.

As net interest margin diminishes, non-interest income remains vital to many credit unions. As an annualized percent of assets, non-interest income is 1.29% at mid-year. The 5300 Call Report requires credit unions to report on only two non-interest income accounts: fee income (account 131) and other operating income (account 659). Callahan & Associates’ mid-year 2007 non-interest income survey is intended to provide a better understanding of the specific components that make up these two composite accounts. By asking credit unions to breakdown these two accounts into several categories, notably credit and debit card interchange income, non-sufficient funds charges and courtesy pay, real estate fees and ATM surcharges, among others.

Participants in the survey comprised 13.6% of credit union assets and 12.0% of non-interest income. Thirty-three participants currently hold more than one billion dollars in assets. Respondents averaged $1.1B in assets with a range of $13.8M to $7.4B. The 2006 results from the second quarter survey are shown as a point of reference. This is not a direct comparison as the survey respondents vary, however the groups are comparable in terms of percentage of industry assets and non-interest income.

The largest source of non-interest income continues to be interchange income from debit and credit cards. This represents over 31% of respondents’ non-interest income. Fees for non-sufficient funds (NSF) and courtesy pay are the next largest category at 22.1%.

While non-interest income grew 10.9% between June 2006 and June 2007 across credit unions, key survey categories experienced relative declines. Out of eleven designated categories of non-interest income, the top three (NSF / Courtesy Pay, Debit Card Interchange and Credit Card Interchange) declined as a percentage of non-interest income (3.1%, 1.9%, and 2.9% respectively). The survey group in 2006 had fewer participants and larger absolute amounts of interchange fees than the 2007 survey group. Shift in composition may partially reflect growth in other categories as debit and credit card transaction volume continues to rise nationally.

Real Estate Fees and ACH Fees also experienced declines this year. Mortgage originations have increased over the past year, but “no fee” mortgages are growing in popularity, as evidenced by Bank of America.

Fees derived from Insurance and Broker Services increased by 3.8 percentage points, the largest growth this year. One possible reason for the increase is the movement of wholly-owned financial services CUSOs from operating independently to operating within the credit union. The remainder of the categories had measured progress.

If you are interested in participating in future non-interest income surveys, please contact Mike Werstuik at




Oct. 22, 2007



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