Recent developments at the federal and state levels, compounded by the nation's continuing economic doldrums, have forced our financial institutions to examine the array of products offered and seek new and increased revenue.
Share draft accounts frequently offered free to members are being re-examined as the products may need to be fee based in order to recover the income losses on debit transactions. An article in the Aug. 17 issue ("Fee Checking May Help Boost Post-Durbin Income," page 18) makes the case for adding fees to checking accounts.
Before jumping on the fee-based account bandwagon, credit unions need to review the options offered by checking product providers and consider the impact on the membership. While many of the fee proposals come with rewards and ways to reduce the fees, let's keep in mind our members who may ultimately bear the brunt of the cost recovery strategies even though Durbin sought to protect consumers with the interchange cap.
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Consider these steps as you plan for changes to checking accounts and investigate other noninterest income sources.
Research the options offered by checking product providers. What rewards are offered? What is the cost to the credit union? What services will the provider give to the credit union to manage the rewards and capture the exemptions to the fees? Can the products be tested or piloted before full implementation?
Know your members. What are your member demographics? What fields of membership or community charters compose the member base? What other options are available to members in the community? Will they stay with you out of loyalty or walk?
Ask the members. Focus groups are an excellent and efficient strategy to gauge member wants. Are the rewards and products offered to members items that are desirable?
Remember your mission and purpose. As cooperatives, credit unions serve all their members who are the owners. While rewards for debit card usage may be enticing to frequent users, some members may only want and need a plain vanilla checking account.
It may be premature to bury the free checking account. Both Visa and MasterCard will provide a two-tiered payment system that would leave a majority of credit unions (assets under $10 billion) exempt from the Durbin debit interchange cap. Several large banks have already announced plans to pilot new fee charges for debit card usage. If consumers don't take to the new charges, there may be opportunities for credit unions to add new members.
It is understandable to be concerned about the lost revenue potential, and there is something to be said for striking first in an offense mode. Credit unions have loyal members–consider them before archiving the traditional check products to the museum or burying them in the dinosaur bone yard.
William Arensdorf
Chairman
Greater Nevada Mortgage Services
Carson City, Nev.
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