Overdraft Program Appeals To Large Group of Members
Credit Union : Security Service FCU
Nominated by: Strunk & Associates, Houston
Nominated For: Use of Overdraft Privilege Program
The most successful credit unions know their members. And John Worthington knows that a large group of members at Security Service Federal Credit Union, San Antonio, Texas, live from paycheck to paycheck.
"They are not bad people," stresses Worthington, senior vice president of corporate communications for the $3-billion credit union. "Some of them just don't make a lot of money and we do what we can to help them."
One of the most effective strategies has been an Overdraft Privilege Service Program that saves members the embarrassment of bounced checks, while attempting to teach them how to better balance their income and expenses, says Worthington.
Security Service works with Strunk & Associates L.P., Houston, in administering the program. Overdraft Privilege, free to all Security Service members with checking accounts who sign up, covers NSF checks that otherwise would be returned to the merchants to which they were written.
Sending A Message
The credit union assesses a $20 fee for each instance, thereby earning some fee income and sending a strong message to the checking account holder. The account holder then has 60 days to make good on the overdraft and the penalty, which can aggregate to $300 before the credit union will turn it into a loan and charge interest until it's repaid.
In addition to saving other fees that might be assessed by the merchant, Worthington says it helps members avoid the embarrassment of returned checks. In addition, the service can lead to increased education to help members learn how to better manage their money, he says.
Overdraft Privilege, first introduced in 1995, attracted only about 8% of all checking account holders, but a recent change has helped ramp up the program's acceptance.
The program now includes debit card transactions, Worthington says. If a members attempts to make a purchase with a debit card and lacks sufficient funds, Security Service will cover the cost of the purchase and then assess the same $20 fee it would had the purchase been made with NSF checks.
The credit union also raised the limit from $300 to $500 and treats the amounts due in the same fashion as before, with voluntary sign up required before Overdraft Privilege kicks in, says Worthington.
The new features have doubled program participation, Worthington says. "Of the 225,000 checking accounts we have, about 15% of account holders participate in the program," he reports.
Security Service also issues lines of credit on checking accounts and will tie checking and savings accounts together to protect members from the embarrassment of being overdrawn, Worthington says.
"This operates as a safety net for our members," the executive says. It's also an avenue to extensive education efforts Security Service undertakes to educate members on how to use money and the monetary tools the credit union has to offer.
"If they aren't educated about money at home, they're not likely to find it anywhere else," says Worthington. "We're trying to fill the gap and at the same time provide them with better member service."