Legislative changes have not decreased the importance of courtesy pay as an essential service among many consumers. And the presence of overdraft forgiveness or grace periods at many cooperative institutions has quashed fears of the $20 cup of coffee that might have deterred members from taking advantage of such services.
Some credit unions prefer not to offer courtesy pay, but some who do may rely more heavily on non-sufficient fund fees as part of their non-interest income strategy. These credit unions must communicate and present the value of the service to secure its continued utilization.
The specific level of contribution from courtesy pay toward total non-interest earnings, as well as its overall role in each business model, varies greatly by institution. Service and application fees, the selling of investments and insurance, and interchange earnings on card products are other major sources of non-interest income, allowing plenty of diversification for each institution in regard to its specific ROA strategy. Yet NSF/courtesy pay income made up the biggest percent of these earnings in Callahan's 2009 Non-Interest Income Survey.
The following graph shows the potential impact NSF fees can have by comparing the non-interest income of credit unions ($20 million + in assets) who do or do not offer courtesy pay.