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This is the time of year when you cannot avoid the movie It’s a Wonderful Life and are reminded what a credit union used to look like.

Times were so simple then. We had shares and we had loans. And then along came the share draft account. The Depository Institutions Deregulation and Monetary Control Act signed into law by President Carter in 1980 did not say we HAD to offer checking. It merely said we could.

What if you had never offered checking?

Seriously. Think about it.

  • According to the American Banker article published in December of 2011 the average checking account costs around $350 a year and fee income averages around $150 per account.
  • PFI (primary financial institution) indicator? Think again. In August of this year Cornerstone consulting reported the median products per household dropped by 28% to 2.52 per household. And one of those is checking.
  • Two words: call center. They didn’t exist until we offered the checking account. What percentage of incoming calls are tied to checking? Even though you’ve spent hundreds of thousands on devices to keep them from calling.
  • One word: Target. I feel bad that the second largest security breach in US history happened to a retailer I love, but it did. And it’s going to cost some credit unions tons of money to make sure their members’ checking accounts are secure.

Raddon has done the math on this for years. A single service household (checking)  is unprofitable. Period. It’s a black hole of expense if you don’t do something with the relationship. PFI doesn’t just happen. You have to be willing to lend to these new unknown entities. 

Bank of America, in the wake of the backlash over their proposed $5 a month debit card fee,  admitted to being “okay” with single service households moving to a credit union.

What if you dumped checking? Told all of your checking account holders that you were going to help them move to the credit union down the street. Maybe even offer them an incentive? Then show them your interest rates on savings? You could probably pay 50 bp or more. And your loan rates? You guessed it – you could beat everyone.  Think of the staff you could reduce. The regulation headaches you could eliminate. The fraud you would avoid.

It’s a wonderful life.

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December 2013