By Ray Birch
EL PASO, Texas–One credit union that has begun paying an eye-popping 7% on checking deposits believes other credit unions will follow its lead if they are able to do a couple of things.
In its case, evolve FCU said there are two reasons behind the high rate:
- It has been generating more revenue as the result of members increasing their debit swipes
- It has been changing member behavior to make them more efficient users of the credit union
“We want to get members moving in the right direction, get them using electronic services and their debit cards more, using their mobile phones more, our smart kiosks, those kinds of things,” explained evolve FCU CEO Ken Walters. “We just introduced the new high-rate checking account and we are doing well with it.”
evolve FCU is now offering a checking account paying an eye-opening 7% APY on balances up to $10,000 if certain qualifications are met. Additional information on the product can be found here. And evolve isn't alone in introducing a high-rate checking product; InTouch CU has also rolled out a new offering.
evolve’s ePriority Checking account requires taking e-statements, using e-deposits, making 30 debit card transactions per month and using electronic bill pay at least one time per month to avoid a $9 monthly fee. The online account can be easily opened from evolve FCU’s home banking or mobile app, the credit union said.
“We got rid of the old business plan and have been pushing people to electronic services,” said Walters. “As we all know, that is where things are going.”
Another Decision Driver
But the account is about more than just moving members to become more efficient, the product preemptively responds to the potential for NSF fees either being capped or eliminated all together by regulators. Walters said evolve FCU had to look for ways to replace that income, which he said can be made up with swipe fees.
“We know that overdraft income is starting to slip away, and we know we can make additional income through greater interchange,” said Walters, who believes the attractive rate will encourage members to make their evolve debit card top of wallet for everyday purchases, such as gas and groceries.
The CU, too, has made changes to encourage unprofitable members to move up to a more profitable checking account for the credit union, or move on. evolve has 11,700 checking accounts and 17,000 members.
“We implemented the $9 monthly fee on checking accounts that didn't have a $5,000 balance with us, and that has encouraged some to move up, and some to leave the credit union,” Walters said. “That was one of the cost savings—getting rid of those unprofitable accounts.”
Not a ‘Free Ride’
evolve, as well, included in its checking profitability forecast that a number of members each month won’t meet all of the requirements to receive the high rate and avoid the monthly charges.
What’s also at work with the new checking account, explained Walters, is a strategy of rewarding profitable members.
“One of the things I have stressed to my board is that being a member of evolve does not mean it’s a free ride,” Walters said. “We pay a patronage dividend every year and I want my good members, who use us as their primary financial institution to be rewarded. I don’t want to have to subsidize those members who don’t want to use us the right way. While this checking account does not completely offset the costs incurred from unprofitable members, it helps, and gives us more money to reward loyal members at the end of the year.”
A side benefit of the account making members more digitally savvy is more people have been using evolve’s smart kiosks in its branches, said Walters, which have taken the place of tellers.
Smart Kiosks Make CU Look, Well, Smart
“When COVID hit those smart kiosks made us look like geniuses,” said Walters. “They can do a great deal of things. And, they have allowed us to downsize our branch footprint and make us more efficient.”
Will evolve raise that rate on its checking account as the Fed hikes interest rates?
“We're probably going to stay where we are. But if rates go up a lot we may look at that down the road,” Walters said. Right now 7% is a real-eye-catching number and no one else in our area is offering that on checking.”
As CUToday.info recently reported, during a recent Trellance webinar, experts stated a checking war could be brewing among CUs, and cooperatives move away from rewards-based checking to higher interest as rates climb. The webinar also outlined that checking accounts will play key roles in the movement’s success this year.