Until the late 1980s when the financial services market was finally deregulated, very often the only thing that differentiated one financial institution from another was what they were giving away, known as "premiums."
It was out of the days of regulation that the "free toaster" emerged as the ubiquitous joke about doing business with a bank or savings and loan.
Now, a number of the credit union executives interviewed by The Credit Union Journal observed that what goes down seems to be popping up again. Many reported they have seen a return to such giveaways, ranging from monetary incentives for opening accounts to small gifts.
Wescom Credit Union's Brian Siegel said he has seen a few financial institutions offering coffeemakers, and noted that Wescom recently offered a limited premium to consumers who came to be members of Wescom through an indirect loan program. Such members frequently have no other relationship with a credit union, and in this case Wescom offered these new members who opened a checking account a reward: a car vacuum.
"We have had discussions of other premiums. For example, we will be giving away a cruise in a sweepstakes," he said. "Members get an automatic entry for opening a checking account or if they sign up for online bill pay. They get one entry for each bill they pay online."
Siegel said the point is not to have a member with a checking account; it is to have a member with an active checking account.
He questioned the need to incent the public to open accounts. "I'm not a big fan of things like paying people $100 to open a checking account. Financial institutions need to have specific goals for incentives and manage them carefully."
In Chatsworth, Calif., Telesis Community CU's Richard Romero said some financial institutions "dabble" in premiums simply to see what piques their customers' or members' interests. He said Telesis recently gave away a roadside assistance kit-which included jumper cables and flat-tire-repair-in-a-bottle-to members who signed up for an auto loan.
"If someone is determined to open an account, the giveaway doesn't really matter," he said.
In San Diego, California Coast CU's Kenneth Horton said he has not seen many premiums in that market. In honor of California Coast's 75th anniversary, the credit union is offering a limited-time bonus of 75 basis points on 18-month, two-year and five-year certificates and IRA certificates.
Kevin Moyle of USE Credit Union, also San Diego, said the only special incentive he's seen in the San Diego market is Union Bank's $75 bonus to people who open a checking account. He said USE is in the planning stages of creating a competitive product.
Andrew Downin of Partners Federal Credit Union said he recently noticed a blast from the past-a credit union that was giving away a toaster to new account holders. He said Bank of the West is giving stuffed teddy bears to customers who open checking accounts.
Lately, Downin has noticed Wells Fargo and Washington Mutual are making donations to charity or to a school on behalf of their customers. "That's kind of a new angle on premiums. Taking the philanthropic view-instead of giving premiums to the customer, giving to a school or charity the customer supports."
