Better Than Free Checking

Paid options can appeal to members if they’re bundled with personalized rewards.


In the weeks and months leading up to Bank Transfer Day, “free checking” became the financial institution equivalent of “open sesame” for new relationships ─ effective, yet not foolproof. Many institutions embrace free checking a strategy they need to stay competitive ─ but free products may not always be the best option for every member or a fiscally feasible option for every credit union.

Pen Air Federal Credit Union ($1.2B, Pensacola, FL) offers a free checking product. But the credit union also developed two new products ─ a free rewards program based on relationship and a paid checking product that offers customizable benefits ─ that work together to drive engagement, cross-sell opportunities, and cost reduction. The message is that there’s a better option than one-size-fits all.

The Premier Relationship Rewards program launched in May 2011 to address Pen Air’s need for a rewards program, but avoid the costs that had plagued transaction based reward systems at other financial institutions. 

“The cost of these kind of programs had caused many other institutions to give up rewards entirely, but we wanted to go about it a little differently,” says Patricia Veal, the credit union’s vice president of marketing. Pen Air worked with St. Petersburg-based PSCU to assign a reward points value for each of their products and services offered, streamlining the options and making them more cost-effective.

To quality for Premier, members just need a savings account, a checking account, a debit card, and eStatements, all of which are available at no cost, says Veal. They get free access to both mobile and regular remote deposit capture and earn an initial one-time reward of 500 points.  Additional points are earned as more services are used and adopted, from 25 points a month for bill pay or eStatements to one time bonuses of 500-2500 points for large loan products.

In addition to originations, the Premier program also assisted with recapture efforts, making a significant impact in the loan portfolio. As of 1Q 12, the credit union has achieved an annual loan growth of 1.71%.

“This Premier option helped us convince members to bring in that credit card, loan, or line of credit and refinance that mortgage,” says Veal. “We are not just competing on a rate level anymore. The member is getting something extra beyond that.”

To date, Pen Air has achieved roughly 50% penetration in checking accounts among its more than 100,000 members and roughly 20% of those members opt for the Premier relationship. Now the credit union wants to improve both figures.

“Our long-term goal is 100% checking account penetration and to get all of those members fully engaged,” says Veal. Pen Air recently began pursuing a complimentary paid checking strategy that would help boost Premier accounts, create additional member benefits, and drive enough revenue through fees to negate any accompanying costs.

A partnership with a second organization, Affinion Loyalty Group, let the credit union select from a series of prepackaged benefits across multiple retailers and organizations. The resulting product was branded a “You Choose It” account.

The paid packages give the members extra value and services they want but are options that a credit union couldn’t normally provide. Members can select between travel-related benefits, shopping discounts, a credit report and alert option, a fraud insurance and protection package, or a healthcare and prescription-based option.

“We picked the programs we knew members would have the most interest in, but none of this is locked in stone,” Veal says. “If we determine that some options are dragging behind the rest, we can revamp those.”

The Premier program and the paid checking rewards program are two separate entities, but they do play off each other. Any member can sign up for any “You Choose It” benefit for $3 each a month, but if they are in the Premier program, they pay just $2 a month for each.

“You Choose It” is currently in the soft launch phase as the credit union smoothes out any potential IT, training, or vendor reporting kinks, yet 120 members have already signed up for the service.

Pen Air will begin initial marketing for “You Choose It” mid-summer to coincide with back-to-school promotions and other seasonal promotions. Despite its extra cost, Veal says she expects it to be “quite popular.”

“Our checking accounts have become more marketable because members see many others options and benefits beyond just the free ones,” she says.




June 18, 2012


  • Thank you to Pen Air FCU for these great marketing ideas.
  • This article is spot on. I work for Bellco CU in Colorado and we recently added a new checking account to offer our members benefits in their everyday lives. Our Max checking account offers discounts on Dining, Entertainment, and Services through an exclusive website called BaZing. In addition to the savings our Members also receive free cell phone protection, ID Monitoring and ID Theft Recovery Services, and Travel Insurance. Member's are looking for something more than Free Checking and I think it is great that Credit Union's our forward thinking and are able to meet the needs of our Member's with a product that gives them more than just free banking benefits.