Three Ways to Grow Your Credit Union’s Non-Interest Income

As a credit union, reconciling your not-for-profit, “people helping people” mission with the need to generate income can be tough. Unlike other financial institutions, hiking up fees or charging for once free services aren’t a credit union’s go-to solution when the need for additional non-interest income becomes apparent. So, what’s a member-friendly credit union to do? Get creative.

Comparing the 2012 and 2013 Non-Interest Income Surveys from Callahan & Associates show that overall, non-interest income is down for credit unions. Here are some numbers to consider:

• NSF/courtesy pay income was the largest source of non-interest for credit unions in 2012. In 2013 it moved to second.
• Non-interest income from debit card interchange and fees is now the largest contributor for credit unions – up to 23.8%, compared to 22.5% in 2012.
• Miscellaneous non-interest income also grew from 4.5% in 2012 to 8.8% in 2013. Safety deposit boxes and skip-a-payment fees were the most common source of this income. 

Growing Non-Interest Income

Other sources of non-interest income on the survey included mortgage sales, credit card interchange and fees, investment and insurance sales, ATM fees and others. As with most issues credit unions need to contend with in this roller coaster economy, it may be time to get creative on sources of non-interest income. How creative is up to you. We have a few suggestions – some are just expanding on current efforts while others include adding something new to the mix:

1. Become their PFI
   Easier said than done, right? But jockeying to become your members’ primary financial institution may not be as difficult as you think. There’s still plenty of backlash from the banking crisis a few years ago that many members would be happy to ditch their bank. They just need reasons to move, and a simple process to do so.
   
   Increased wallet share is basically the Holy Grail for credit unions, and sometimes less is more. If your credit union doesn’t offer free checking, it should. The more members you attract with fewer fees can exceed what you currently earn on your regular checking accounts.  Relationship discounts are also a popular way to attract more wallet share. Discounts on loans if members use their checking accounts to make payments is becoming more commonplace. Also, have an online (and in-branch) switch kit to help simplify the move for your members.
   
   
2. Think Beyond Interchange
   As the survey says, debit card interchange and fees are the top source of non-interest income for credit unions. But there are other ways your credit union can take advantage of debit cards. Train your front line staff to promote debit card overdraft protection if you have it. If you don’t, you might want to consider adding it. Let your members know exactly how it works, what it costs and how it can help them. Chances are they’ll sign up.
   
   Offer instant-issue debit cards. A financial consulting firm discovered that credit unions/banks that offer instant-issue debit cards have a 15% higher activation on new accounts, 20% more swipes and new accountholders spend 20% more. Finally, if your credit union wants to benefit even more from debit card interchange and fees, then promote card acquisition and usage. Maybe offer incentives for increased usage. Once your members become comfortable using their credit union debit card, they’ll use it more often.
   
   
3. Partner Up
   Sometimes all it takes to boost non-interest income is the right program or partner – or both! Many member rewards programs offer credit union incentives for active participation. This lets your credit union bring your members attractive discounts while generating non-interest income at the same time.
   
   With many programs you’ll need to weigh any initial outlay to potential earned income. With other programs, like our Love My Credit Union Rewards program, credit unions only need to promote the program to earn non-income incentives. We even offer free marketing materials and support to help accomplish this. Discount partners like Sprint and Credit Union Auto Club offer valuable incentives – while other big-name partners like GM, TurboTax and DIRECTV help attract your members to the program. It’s a good source of non-interest income for minimal effort – a total win-win for your credit union!

However your credit union chooses to grow its non-interest income, it’s vital to rethink how you do it. With more and more consumer/member scrutiny on fees and rates, it pays in the long run to have the reduced fees and comprehensive services that non-interest income can help bring.

To learn more about Love My Credit Union Rewards, click here. To learn more about our partner discounts, click here.