How Cash-Back Offer Is Helping To Ramp Up 1 CU's Lending Operation
WOODBRIDGE, Va.-Offering members cash back on the spot is driving strong lending growth at one credit union.
In its second annual Instant Cash Back promotion, Belvoir Federal Credit Union here has already paid out more than $85,000 to members while adding more than $8.5 million in loans to its portfolio as of mid-July.
In its first iteration last fall, BFCU used a 1% cash back incentive on auto loans to great success, with a strong 35% ROI, according to CFO Michael Ligon. The latest promotion is extended to all auto and personal loans, as well as personal lines of credit that are new to the $269-million credit union.
Review Uncovers Negative Trend
"After reviewing the first quarter trends in 2010, we recognized the drop-off in loan production. So, we ran the cash-back event to kick-start our lending across the board beginning May 2010 and plan to run it until August," eMarketing Specialist Amy Shanks told Credit Union Journal, adding that Belvoir expects ROI to be similar to last year's promotion as the offer has boosted loan balances in the last several months by 100% compared to 2009.
The credit union has strongly pushed the promotion, which cannot be combined with other offers and loan specials, through print ads, online advertisements and through vendors such as Yahoo!, AOL, CBS Radio and Comcast. The marketing effort also includes person-to-person viral marketing with handouts and fliers in the community and special mention at Belvoir FCU's annual Installation Appreciation Day event.
No Revenue Given Up
Despite a tough economic environment, the credit union is not giving up any revenue by offering the instant cash back.
"Since we were already paying our partnered dealers 1% for each loan financed, we figured we could save that 1% and give it to our members instead," Shanks told Credit Union Journal. "[And] when comparing investment options for the credit union, we get a higher investment rate when applying the 1% cash back to our portfolio. For example, our June average rate was 3.97%, compared to investing in a five-year treasury rate of 1.77%."