Growing the Regular Shares

Most credit union executives prefer most of their member deposits in a traditional share account. It’s inexpensive money and it is generally fairly stable money. What’s not to like?

Consider though that Regular Savings alone doesn’t create a loyal member. These days most credit unions don’t pay enough on shares to attract new members. We’re keeping only members that aren’t paying attention…not a good way to create loyalty.

Some Ideas

Here’s a couple ideas for growing regular shares:

1. Pay an attractive rate for members that convert to an online share account. (Require electronic statements and a minimum balance of $500). Market to every member with less than $100 in shares.
2. Make sure members are aware that if they save enough money, $2500 for example that they can then move to a Money Market Account or Savings Certificate. Do what is best for your member and be happy for them when they’re able to move their money to a higher yielding account. This is how you establish credibility and a positive relationship with your members.

Collaboration

The best ideas come form us collaborating with your management team. Where to grow depends on what type of loans you’re booking. Your ALM Committee should also be involved. Let’s talk.

Money Market Accounts

Credible Rates?

I remember when credit unions actually paid a “money market” rate. Members don’t really know what a “money market” rate is but they sure know what it isn’t. There are a lot of credit unions losing credibility with their members by paying such low rates.

Some ideas

• Pay actual “money market” rates. If you don’t need the money then pay on the low end but avoid being completely out of the market. When you need money pay on the high end.
• Pay a “money market” type dividend rate that is a win-win. A nice return for the member at a rate the credit union can afford. This establishes credibility with your depositor. It takes a lot of years to establish credibility with your members but credibility can be lost with one “non money market” dividend.
• As a former CEO, I much preferred ten $10,000 money market accounts to one $100,000 money market account. The smaller accounts are more stable and tend to use your other services. So I wouldn’t reward the big depositors with a much larger dividend. I preferred to pay very competitive on the low end.
• Don’t penalize members to severely for dropping below your minimum. On those accounts pay the regular share dividend. They may temporarily need their money.
• Remember, credibility is the key to a successful money market program.

Savings Certificates

Fixed Term, Fair Rate with no Risk to your Member!

Here are a few reasons Savings Certificates are so popular with members:

• No upfront fees
• No chance of losing their initial investment
• Absolutely safe! Federally insured
• Nice return

I would guess a lot of savvy members laddering in 5 year Savings Certificates did better than their neighbor investing with a broker, paying the broker fees and riding the stock market up and down. And they may have slept a lot better.

Why be active with Savings Certificates?

It’s a vital tool in liquidity management allowing credit union management to quickly meet loan demand.

It’s also a vital tool for Asset Liability Management. Long term CDs offset some of your longer term loans.

In addition, members with a Savings Certificate are more loyal and active with your credit union. It’s another win-win.

Suggestions

Avoid aggravating your members by considering the following:

• “Bumps” defeat the reason financial institutions created the product in the first place. And its a gimmick. The members you’re looking for generally hate gimmicks!!!!
• Don’t get too carried away with the penalty. You have to punish members that pull out money chasing higher rates. However, make it a fair penalty. More than one year of interest is excessive and charging a penalty that results in them getting back less than their initial deposit is inappropriate.

Other Ideas

• Build a positive relationship with members by allowing them to withdraw part of their deposit (25% for example) at no penalty. (Yes, I know, Bank Examiners never like this but really, how much does your examiner deposit at your credit union?)
• Reward members willing to deposit for 5 years. Even though in the long run it’ll likely cost you more money, it’ll make your ALM reports look much better and help you maintain your ROA when rates go up.