ORLANDO, Fla. — With federal legislation potentially curtailing revenue streams and adding regulatory burdens, credit unions will have to walk a fine line between boosting fee income and turning off members.
In a presentation at the recent CUES CEO/Executive Network conference Raddon Financial Group Managing Adviser Andrew Vahrenkamp revealed a number of areas in which to tighten up fees and pointed out a couple of avenues CUs can take to boost cross sales and card volume.
Step 1: Good Waiver Policies
Improving fee income starts with having good waiver policies, as an inconsistent or overly loose approach to waiving leads to missed revenue.
"Twenty to thirty percent of all charges are either waived or not enforced," Vahrenkamp said. "We need to make sure we are maximizing all the income we can get. Look through every fee you charge, look at the GLs - are you getting what you should be getting?"
Vahrenknamp suggested setting firm limits on when to waive fees and to discriminate the frequency of those waivers based on member relationships; a member with just a checking account might not receive a waiver where one with multiple products would. ATM fees also provide lucrative source of non-interest income and there appears to be no competitive advantage to lower surcharges. Vahrenkamp relayed an example of a credit union that boosted its surcharge from $.50 to $2.99 and saw no change in traffic volume.
"They are using the ATM for the convenience, and they are going to continue to use the ATM," he said, urging CUs to simply price their surcharges to the market and they'll see the higher revenues roll in.
Utilizing the proper rewards programs can increase interchange income; Vahrenkamp noted that there is a big difference between a member who frequently uses his debit card and one who favors his credit card. He recommended CUs use a cash-back program, and one that is not "overly rich" for debit users and a points-based system for credit card users. "People who use a debit card are focused on cash flow, so the idea of cash back really resonates with them," Vahrenkamp explained.
Increase Cross Sales Efforts
CUs should also up their efforts to cross sell to members who use their debit and credit cards more frequently as they are more apt to have higher loan balances and are more likely to take on additional products. Credit card users are particularly more apt to use additional products and services, and with 86% of all credit card users in the country with the "big six" there is a huge opportunity for CUs to provide better service and lower rates for those individuals while boosting their own bottom lines by adding more profitable members into their rolls, said Vahrenkamp.
