To Free or Not To Free – Checking Issues Loom

My Marketing Strategy
Nicolette Lemmon, President & Founder

In writing marketing plans in the last few months, one thing kept coming up – how to increase non-interest income. Operation costs continue to put pressure on the bottom line as well as the assessments from NCUA for the cost of failed institutions.

So, what promotions for which products and services will help increase the bottom line at our credit union clients? One answer is interchange income from debit and credit cards. Because the debit card is becoming increasingly popular over checks, the benefit is the interchange income potential. 

The catch is that checking accounts have always been loss leaders, costing an estimated $150 or more per year to have the account open for a member. When Overdraft Protection was introduced, it became the savior to Free Checking. The fees were bringing a positive spin to the low or no-cost checking at credit unions across the land. However, legislation started playing havoc with ODP and now there is an upcoming change to trim “interchange fees.”

A recent article in the Wall Street Journal was headlined, “Why Checking Fees Keep Going Up.” The photo used in the story was of a person at a Navy Federal Credit Union ATM with the caption, “Credit Unions are a good source of low-cost checking accounts.” 

In the “old days,” checking accounts were considered the place where you had your primary financial relationship. Now, in member surveys, 70% of the members who say they have checking accounts with the credit union have another one at a competing institution as well. That means I’m still not gaining loyalty from getting a checking account opened.

As a marketer, it is great to be able to have a “free” checking account to offer, however, the pressures of this new economy look like a “free” will come with requirements beyond just direct deposit. What to do?

The best bet in my view is to allow consumers to get a better “deal” by offering different checking choices with ways to keep the costs low or no-cost.  Sounds a lot like relationship pricing and I can work with that!

What’s your take on “free” checking from both sides of the table?

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