LIVE OAK, Texas-Randolph-Brooks FCU considers itself the Southwest Airlines of financial institutions.
With banks charging for debit cards and local FIs cutting back on debit rewards, according to RBFCU, the $4.5-billion credit union recently increased its debit rewards and saw new membership nearly double and debit transaction volume increase by 17%.
"It's a lot like what Southwest Airlines is doing with its Bags Fly Free campaign. We are holding the line on our debit rewards and even giving a little extra," said Sonya McDonald, SVP-planning and market development. "The promotion opened consumers' eyes to the value of the credit union and we had our strongest quarter ever, and that has continued in the new year."
McDonald admitted that when the credit union decided to increase its standard 10-cent-per-debit-swipe cash-back reward to 15 cents for the final three months of 2011, it had no idea what a marketing tool the move would become. "Our intent always is to give back to our members. But when Bank of America charged that debit card fee, well, that was very fortuitous for us," said McDonald.
In October RBFCU signed up 7,200 new members compared with 4,200 in October 2010. More than 6,000 new members enrolled in November, compared with 3,600 for November 2010. Debit transactions increased 17% in the final quarter over the same period last year.
McDonald reiterated that the debit reward bump-up was not a marketing move, nor a debit card activation and usage strategy-but it has turned out that way. "When about 80% of the people joining are getting the checking account and the debit card, and transactions go up 17%, there certainly is a correlation between the new members becoming active users of our debit card."
'A Big Differentiator'
The promotion is in line with the CU's philosophy of giving members exceptional value. Last year the credit union's debit rewards returned $5 million in cash back and $6.6 million this year. The debit payout comes to members each year in January. RBFCU has been making the payout for four consecutive years.
"This has become a big differentiator for us in our market so we will continue to offer it as long as we can. We don't have any plans to make a change. But if we do, it will be from merchant pressure driving down interchange."
It will likely take a great deal of pressure to get the credit union to consider cutting back on debit rewards. The success Randolph-Brooks enjoys, explained McDonald, comes from its extremely member-centric approach to doing business.
"It's because of our members that we are doing well," said McDonald, pointing to 1.71% ROA after assessments last year and 11.54% capital. "When we do well we reward our members even more and it builds on itself. In a time of economic crisis we have continued to grow very well."
