Credit Unions Still Lead Banks
In Offering Free Checking

By Jon Haller
Director of Market Research, CUNA

If you’re among the one in three credit unions that offer checking, but don’t offer any free checking accounts whatsoever, consider adding one—a free, non-interest bearing account.

Checking accounts have historically been and continue to be credit unions’ key to securing primary financial institution (PFI) status among their members. CUNA studies have shown that anywhere from two-thirds to three- fourths of members who use the credit union’s checking account consider the credit union to be their PFI.

While the product market-share benefits that come with being members’ PFI have been documented by CUNA over the years, only about 40% of members have a checking account at their credit union, according to CUNA’s 2001 Marketing By the Numbers Survey Report. While this percentage may be considered fairly impressive by some, it nonetheless indicates there are opportunities for credit unions to make greater strides in this area and, more importantly, to reap the accompanying benefits. To this end, offering free checking accounts can help pave the way to higher PFI levels.

Over 65% of credit unions that provide checking services offer at least one free checking account to their members, according to CUNA’s soon to be released 2002 Fees Survey Report (Stock #23391, $150 + S&H). This is similar to 1998 (70%). Furthermore, roughly 65% to 80% of all credit unions with assets of $5 million or more offer free checking.

Banks/savings associations, on the other hand, while making moderate strides to provide free checking, nonetheless trail credit unions by a considerable margin. At year-end 2000, just 28% of banks/savings institutions provided free checking—up from only 15% in 1999, according to the Federal Reserve’s 2001 Annual Report to the Congress on Retail Fees and Services of Depository Institutions.

Roughly half of credit unions’ interest-bearing checking accounts are free, while the figure shoots up to two- thirds when examining credit unions’ non-interest bearing accounts.

STRATEGIC CONSIDERATIONS:

In addition to adding a free-checking option if you don’t already have one, here are a couple of other suggestions:

• If you currently provide a free interest-bearing checking account, and are entertaining the possibility of assessing fees for this account, considering simply eliminating the interest-bearing feature of this account. Members may find it more acceptable to "not receive something extra (i.e., not receive interest)" than to "have something taken away from them (i.e., their money, in the form of fees)." Measure members’ preference for a "interest-bearing, with fee" versus a "non-interest-bearing, with no fee" account.



• Build members’ and potential members’ awareness of your fee, minimum balance and/or per-check fee advantages over area competitors. CUNA studies indicate that 15% of members don’t even know the credit union offers checking accounts; far more are quite possibly unfamiliar with the specifics—the fee, minimum-balance and per-check fee features—of their program(s).

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