This article from creditunions.com caught my attention this morning: 340 CUs Differentiate with Bonus Dividend. That’s roughly 5% of the industry. So what’s the cutoff? 10% of an industry doing something before it is mainstream? 340 just struck me as a lot credit unions do it to be differentiated. Granted it does greatly differentiate CU’s from banks which is great for the industry, but can it differentiate individual CU’s?
How many people does it not take to be differentiated?
December 4th, 2007 · 4 Comments
Tags: · bonus dividend, differentiation, promotions
4 comments for this entry ↓
1 Elaine // Dec 5, 2007 at 10:08 am
I wonder if the implication was differentiating from banks, rather than from other credit unions. I think it’s probably the first thing I’ve heard of that demonstrates the difference in a way that a member would actually pay attention to. (Nice comparison to REI in the article, btw. I love my REI dividend checks!)
2 Jeff Hardin // Dec 14, 2007 at 3:52 pm
To me, it’s a great differentiator for the individual credit union in the overall financial services industry. I wish more would do this - to my knowledge, only two (out of 115) are doing it here in NC.
The CU that gave dividends on both deposits and loans is doing a great thing. After all, the people who borrow the most from the CU probably need that dividend the most.
3 Credit Union Warrior // Dec 14, 2007 at 4:39 pm
The key is finding a fair way to award the bonus. If it’s all about how much you have on deposit, I think you have missed the mark. In such a scenario, all you have done is found a way for wealthy investors to get easy returns. This approach certainly doesn’t help young members, who simply do not have the earning power of those with more years of work experience. And it certainly does not allow for an even playing field with respect to working class members.
As a twist to Jeff’s suggestion, you could advise that such bonuses be awarded as loan interest paid rebates. Period. However, as demand for these loans goes up, so will the need for deposits to fund the loans. That, in turn, will drive up the rates needed to attract such depositors. Subsequently, the amount of rebates will decrease due to the effective slimming margins.
My take? Keep your loan rates as low as possible, and your deposit rates as high as possible year-round. All members benefit, no matter what their intention is, and the risk for accumulating excessive capital is minimized.
4 Robbie Wright // Dec 14, 2007 at 4:41 pm
The best bonus dividend I’ve heard so far has been to award X dollars per service. That way single service indirect households who don’t use your products get the least amount of money, but those families who have their savings, checking, money market, CD’s, IRA’s, car loans, investment accounts, children’s savings accounts, etc get the most money.
Leave a Comment