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Courtesy Pay Fees: An Overdraft Protection for Credit Unions

By Brooke Vaughan // January 15, 2021

A person swipes their debit card at a cafe counter. Opted-in credit union accounts may overdraft and be charged a courtesy pay fee.

Chances are if you have a checking account with a financial institution, you know what it means to overdraft. When you overdraft, you don’t have enough funds in your account to cover a transaction, so the institution will either decline the charge or foot the bill. Many banks charge fees when you overdraft your account. Credit unions are no different.  They just have a special name for them — courtesy pay fees.

What Is a Courtesy Pay Fee?

Credit unions’ courtesy pay programs allow the institution to cover a transaction when an overdraft occurs, or you don’t have enough money in your account, up to a certain limit set by the institution. When credit unions pay your overdrafts, they will charge you a courtesy pay fee.

Courtesy pay is credit unions’ form of standard overdraft protection, but like banks, you can also set up other forms of overdraft protection — such as linked checking or savings accounts, or a line of credit — to cover transactions that overdraft your account. Credit unions will typically attempt one of these forms of overdraft protection, if applicable, before applying courtesy pay. 

When you incur a courtesy pay fee, it may appear on your statement as: 

  • Courtesy pay fee
  • C-pay fee
  • CP fee
  • CP item
  • Or in some other slightly ambiguous form

What Does Courtesy Pay Cover?

Unlike with banks, which require you to either opt into or out of overdraft protection, courtesy pay at credit unions automatically applies to certain types of transactions, typically including: 

  • Checks
  • ACH transactions
  • Recurring debit card transactions

But credit unions don’t pay just any type of overdraft transaction. In order for them to authorize and pay overdrafts using courtesy pay on one-time debit transactions and ATM withdrawals, you must first opt in. 

If you have not opted into the additional courtesy pay program but have set up another form of overdraft protection — such as a linked account or line of credit — one-time debit or ATM charges that overdraft your account will likely be covered by the overdraft protection. If you are not opted into the additional courtesy pay program and also have not set up another form of overdraft protection, those charges will simply be denied. 

You may opt into or out of both the automatic courtesy pay program (checks, ACH, and recurring debit transactions) as well as opted-in courtesy pay (one-time debit and ATM transactions) at any time.

How Much Does a Courtesy Pay Fee Cost?

According to Cushion’s analysis, the average courtesy pay fee costs $27.30, most often running $25, $29, or $30 per overdraft charge. 

Courtesy pay fees charged by credit unions are slightly lower than overdraft fees charged by banks, which hover around $35. In general, credit union fees tend to be lower than bank fees.

Who Is Eligible for Courtesy Pay?

The majority of credit unions specify that their courtesy pay programs are only available to customers whose accounts are “in good standing”. Some criteria that credit unions have for an account to be in good standing require that you: 

  • Make regular deposits
  • Have no charge-offs
  • Have not already exceeded the courtesy pay limit set by the credit union
  • Have no delinquent accounts with the credit union for more than a certain amount of time, such as 30 days
  • Or that your checking account has been active for a certain amount of time, such as 30 days

Credit unions use courtesy pay on a case-by-case basis and may choose not to cover a charge even if you meet their criteria. If a credit union chooses not to cover a charge, you may still incur a non-sufficient funds fee, or
NSF fee. You cannot be charged both a courtesy pay fee and an NSF fee on a single purchase.

How to Avoid Courtesy Pay Fees

Especially during these financially uncertain times amidst a global pandemic and widespread unemployment, courtesy pay fees can unfortunately be inevitable, especially when it comes to paying for essential items such as groceries and utilities. But there are small things that you can do to decrease your chances of incurring these fees. 

  • Keep an eye on your account balance and charges. Banks are not legally required to notify you if you’ve overdrafted, so they could apply the fee and deduct money from your account without you ever having known.
  • Sign up for low-balance notifications. Rather than manually checking your balance and charges, you can sign up for notifications that alert you when you’re nearing a low balance. Most mobile or online apps offer this feature and allow you to set the threshold yourself so it’ll notify you at as low or high of a balance as you’d like.
  • Opt out. You are not required to opt into courtesy pay for one-time debit and ATM transactions, and although the basic courtesy pay program automatically covers certain transactions, you can opt out at any time.

How to Get a Courtesy Pay Fee Refund

Because courtesy pay is essentially a credit union’s form of overdraft protection, you may be able to follow the same steps for a courtesy pay refund as you would for an overdraft fee refund from any other bank. 

When calling your credit union for a refund:

  1. Prepare your personal information. Your credit union may ask for: your name, address, social security number, and/or your account number
  2. Politely introduce yourself. “Hello. My name is [your name], and I recently received a courtesy pay fee from you. I’m contacting you to see if you would be willing to refund this fee.”
  3. Craft your response. Have you been financially affected by COVID-19? Are you a loyal customer who has multiple accounts or has banked with the credit union for an extended period of time? Do you make regular deposits? Is this overdraft a rare occurrence?
  4. Be polite, persistent, and prepared not to get a refund every time. Be kind to the representative — they likely didn’t make the rules. Press the issue a reasonable amount. If they don’t issue a refund, you might have to count this one as a loss.

How Can Cushion Help?

Cushion’s ⚛️ Fee Genius scans your accounts regularly, catches pesky fees, figures out what is negotiable, and more. We provide you with all of the “what” behind fee negotiation so you only have to figure out the “how” of negotiating your fees.

And if you want Cushion to negotiate your fees for you, well we’re sort of geniuses at that too. To date, we’ve refunded our customers more than $10 million in bank and credit card fees. If you’d like to opt into our 💭 Fee Negotiation add-on, just flip the switch during sign-up or in the Profile tab of your dashboard.

Cushion helps you waste less money, save more, and live a financially healthier life. We monitor your bank and credit card accounts 24/7, find and alert you about pesky fees, let you know which fees are negotiable, which banks are cooperative, and can even automatically negotiate on your behalf.* To date, Cushion has secured customers more than $11 million in bank and credit card fee refunds—and we’re just getting started.

*Cushion only negotiates fees with high refund odds. We cannot guarantee any negotiations, a regular frequency of negotiations, or fee refunds—your bank makes the final call.