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Courtesy Pay: Service Fee or “Junk Fee?”

By John Cohron, Chief Executive Officer, ADVANTAGE

March, 2023

In President Joe Biden’s State of the Union address on February 7, he called on Congress to crack down on “junk fees.” He defined the term in his address as, “those hidden surcharges too many companies use to make you pay more.” Among those attributed to this murky category were charges related to courtesy pay/overdraft services.

The Credit Union National Association (CUNA) wasted no time in addressing his remarks, stating:

“The president’s use of the term ‘junk fee’ is overly broad and ignores the needs of low-income and middle-income consumers who depend on these services to resolve short-term financial difficulties. It does not consider the costs involved in providing needed financial services that consumers depend on. Most importantly, consumers must opt-in to having the option of overdraft protection, and the cost to use it. The people who choose to use the service are the people who pay for the service. 

“Credit unions believe in empowering consumers to manage their finances – and this includes giving them the choice to access a variety of services if they need them. Consumers use overdraft protection as a safety net – protecting them from life’s challenges.”

Filling in the details
This misrepresentation paints courtesy pay/overdraft fees with broad strokes, characterizing all fees as detrimental to consumers and a scheme to make money. Unfortunately, what is ignored are the service-based, fully disclosed, compliant overdraft models that many credit unions have been offering their members as just one of many optional financial services.

The whole story is, of course, much more nuanced. Yes, there are wayward programs out there with unreasonable fees or lack the necessary transparency — those issues should most definitely be addressed. But responsible, consumer-centric program provides a true service that some consumers find beneficial and choose to use in certain situations. The associated service fee has distinct differences from a “junk fee.”

Delivering on value
“Junk fee” is a good buzzword for getting attention, but it doesn’t accurately describe many of the programs in the market today. Additionally, many credit unions go to great lengths to offer pro-consumer services like courtesy pay/overdraft privilege that their members find value in.

And, yes, 89% of consumers find their financial institution’s overdraft protection valuable. Because the alternatives for not having a major bill paid due to non-sufficient funds can result in an expensive late fee, dinged credit score, or cancellation of services and other consequences worse than a one-time fee to ensure their payment is made on time.

If access to such a service is appreciated by 9 out of 10 people, it seems inaccurate to label it as a “junk fee.”

As an expert in courtesy pay/overdraft consulting for decades, ADVANTAGE has provided guidance throughout the years to meet the demands of both regulators and consumers. By helping credit unions across the U.S. offer fully disclosed, transparent, and compliant solutions, we ensure that consumers find value — not “junk” — in their financial institution’s services.

To re-evaluate your program and verify that it provides a valuable service to your members, contact ADVANTAGE.


ADVANTAGE, powered by JMFA, is dedicated to empowering financial institutions with strategic solutions for growth and success. Our comprehensive services include overdraft program consulting and compliance, checking account acquisition strategies, contract negotiation expertise, and consulting for technology strategy, evaluation and selection. With a rich history of serving credit unions nationwide, we are committed to delivering exceptional value and fostering long-lasting partnerships. Choose ADVANTAGE, to elevate your performance, identify new opportunities, and build more value.