BLOOMINGTON, Minn.-Star Choice CU is working to discourage big deposit inflows by cutting off interest to large money market depositors.
Dan Christiansen, president of the $47-million credit union, said the dilution of its net worth ratio caused by a strong 7% growth in new shares prompted the new strategy, which has entailed notifying about 20 members that it is no longer paying dividends on money market accounts of more than $100,000. "We're encouraging them to seek higher rates elsewhere," Christiansen told Credit Union Journal.
Other credit unions have adopted for offbeat methods to shrink their assets. One Nevada CU, for example, actually paid members with a single account to withdraw deposits.
Star Choice's money market account is only paying 0.2%, but the credit union has been inundated with new members and new deposits since Bank Transfer Day and the influx has diluted its net worth below 8%, to 7.7%, according to Christiansen, who hopes to rebuild it above 8%. "The funds just keep coming in," he said.
"We don't want to discourage new members but we don't need the big dollars," said Christiansen, noting that money market accounts generally pay higher rates, attracting so-called hot money.
