By Ray Birch
MOLINE, Ill.—In a move to bring in new members and deepen relationships with existing account holders, one credit union is paying 5% APY on checking.
But to get that very attractive rate, consumers have to use their debit and credit card, a unique twist to high-rate checking products.
The decision by the $754-million Vibrant Credit Union runs counter to many CU high-rate checking programs today that are simply tied to debit swipes.
While the new Moneymaker Checking requires members to make 12 debit swipes per month—a typical transaction amount to receive the high rate—it also requires account-holders to spend more than $1,000 on their credit Vibrant card monthly to get the 5%.
‘Incredibly Competitive’
If members meet both requirements, which also include taking e-statements and direct deposit, they receive 5% on balances up to $10,000. If members just meet the debit requirements each month, they earn 3.5% APY on balances to $10,000. If members fail to reach both requirements, they receive 0.10%.
“We wanted a product that would be incredibly competitive and would attract new households and from there we could cross sell other products. We trust in our ability to cross sell products that our members need,” said Chief Experience Officer Steve Ducey.
Acknowledging the account is unique, Ducey said Vibrant looked carefully at its existing checking pricing and member activity to determine if it could afford the high rate. He said the high rate is necessary, even in now in what could be a declining rate environment, to attract new members.
“We looked at the data and ran the numbers,” said Ducey, “and this is a rate we can afford.”
Marketing VP Liz Rose said data around members’ typical credit card spend backs the move.
“Our average spend per month on our whole credit card portfolio is $550 and $1,408 for our rewards card,” said Rose, noting the average of the two is about $1,000. “We just sunsetted our Save Your Change checking account, which required 12 debit swipes per month to get rewards, so we know our members can meet that requirement, as many of them did with that program. We do not believe these two requirements will be too taxing for our account holders, especially when they are looking at a 5% return.”
A Key Focus
Ducey said deepening relationships is a key focus of the new account.
“That’s why we layered on a loan product,” he told CUToday.info. “We looked at our average spend per credit card swipe and we looked at our debit interchange and we figured we could afford bumping the rate up to 5%,” he said.
Moneymaker account-holders must take the credit union’s standard Mastercard. The rewards card is not eligible for the program.
That 5% return is what is needed today to attract more checking members, Rose said the CU believes.
“No one is paying that rate, especially as rates are declining—something we realized was going to happen as we were designing Moneymaker Checking,” she said.
Looking to Drive Growth
In the first two weeks Moneymaker Checking was available, checking account leads tripled, Ducey said.
“We, too, really believe in this product’s ability to convince consumers to join Vibrant,” Ducey said. “What really confirmed that for me was when one of my friends called me and asked me about Moneymaker checking. He’d seen the 5% rate. He wanted to know how it worked and then he switched his checking account to Vibrant—and he never moves his banking relationships–but he did for this product.”
To make room for Moneymaker Checking, Vibrant consolidated its four checking products to two—the other product being a no-frills free checking account. The credit union also backed it with a large media campaign that includes digital, direct mail, billboard, TV and radio. “We’ve been pretty vocal about this product,” Rose said.
“Our main goals with Moneymaker Checking are growing household relationships and new members,” reiterated Ducey. “We want to grow households by 10% year-over-year, organically.”