Credit union to charge for transactions on savings accounts​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​

A LARGE credit union is introducing transaction charges for members who want to access their savings accounts.

he move by First South in Cork is believed to be the first time any financial institution has put in place charges for transacting on savings accounts.

Banks and credit unions already charge for current account transactions.

But from February, there will be a fee of €1 each time a First South member wants to lodge money or take it out of their savings account.

Instead of paying €1 for each transaction members of the credit union have been given the option of paying €4 a month to cover all in-person branch transactions and electronic transfers.

It comes as a large number of credit unions have put a cap on the amounts that can be saved with them.

They are suffering from a surge in savings. Credit unions have to put aside €10 into the reserves for €100 put on deposit by members.

Low investment returns and weak demand for member loans means credit unions are struggling to make money.

Much of the excess cash held by credit unions ends in the mainstream banks which impose negative interest rates on them for holding the funds.

An email sent to First South members states: “The financial landscape has changed considerably over the last five years.

“The returns on investments are extremely low, and in some cases the credit union is being charged a negative interest rate. In order to maintain our service levels, we will introduce fees and charges from 1 February 2021.”

Chief executive George Cantwell said the new fee would not apply to those under the age of 18, or to anyone putting money into a young person’s account. Students would also be exempt.

He said Covid-19 had encouraged people to save more. Although loan volumes were up last year, First South’s loans only represent less than a quarter of its assets.

The credit union has assets of €215m, of which €185m is savings. Loans total €48m.

A €30,000 savings cap is applied to new members, with this likely to be extended to all members later next year.

Mr Cantwell said: “You can’t run a business when your savings are costing you money.”

He said there was little or no return to be had from investing excess funds, with even recent Government bonds giving negative returns.

The credit union is set to report a €200,000 deficit this year for the first time in years.

He said the new fees will not be used to make a profit but will offset costs.

First South has 34,000 members and covers Cork city centre, north and south of the city, and an area that stretches to Old Head. It emerged from the merger of five different credit unions.

Founder of the website Brendan Burgess said charging people to use savings accounts was a worrying development.

“The charge of €1 per transaction seems very high. If one of the main banks were doing something similar there would be uproar.”

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