Stressing Checking Accounts
BIRMINGHAM, Ala.-Credit unions this year may find overall growth a challenge, but targeted growth can be accomplished even in tough times, insists Dennis Dollar.
The Dollar Associates principal expects many credit unions will eliminate free checking (Credit Union Journal, Jan. 3). "I believe we will see a real shift in 2011 towards credit unions increasing their checking account penetration within their existing membership and begin to drive income from growth in those accounts via fee income. The era of free checking is, if not dead, on life support."
According to Dollar, the challenge for credit unions will be to better brand and add enhanced value to their checking accounts in the post-free checking era. "With rewards programs, ADD insurance, identity theft protection, and other add-ons, credit unions are in a position to grow their checking account penetration within their existing field of membership. This will increase non-interest income earnings without a great deal of additional asset growth. Checking account growth is a real opportunity."
Dollar sees opportunities within student lending, as well. "With tuition increases driving the cost of college beyond what the federally administered guaranteed student loan program can cover, there is a real growth opportunity for credit unions in supplemental student lending. SallieMae has developed some incredibly innovative student lending programs specifically for the credit union market, indicating there is demand out there."
Credit unions should pay close attention this year to managing bankruptcies, continued Dollar, who noted banks typically outperform credit unions in this particular arena.
"Credit unions need to treat bankruptcy management, particularly in this era, as a book of business-not as a sideline emphasis presuming total loss. Legal fees can be saved in almost every credit union with a more systematic and better managed approach to bankruptcies, and most credit unions can increase their reaffirmations if they are more focused in doing so. Unfortunately, most credit unions turn every bankruptcy notice over to a local attorney, consider it a total loss, and are thankful for any recovery regardless of the legal costs involved."