Checks and Balances: Share Draft Strategies

The share draft penetration rate has only improved from 40.7 percent in the third quarter 2002 to 42.9 percent in the third quarter 2005. Opportunities remain for credit unions to raise members’ usage of this key account.


The share draft account is one of the most critical relationships that a credit union can establish with a member. It provides an avenue to introduce several auxiliary products and services. Not only can the credit union increase the likelihood of becoming the member’s primary financial institution, but also the credit union can generate non-interest income to improve its bottom line.

Even with all of the advantages the share draft account offers, the penetration rate for the credit union industry has only improved from 40.7 percent in the third quarter 2002 to 42.9 percent in the third quarter 2005. Credit unions over $50 million in assets marginally increased to 47.3 percent while credit unions over $1 billion in assets reached 52.0 percent penetration. Opportunities remain for credit unions to raise members’ usage of this key account.

Some credit unions have focused on the share draft opportunity. By proactively developing internal and external strategies, they have increased their penetration levels and in turn their overall share growth. A couple of best practice strategies are discussed below.

Develop a sales culture: Credit unions need to develop a strong member inception program that introduces members to related products and services. New members are the most receptive to opening new accounts that they think are germane to their day-to-day and long-term financial planning activities. Montgomery County Teachers FCU ($360M in Rockville, MD) offers employee incentives for opening new accounts. For example, employees earn $7.50 for every new checking account, $5.00 for bill pay, and $7.50 for direct deposit. “The checking account is no longer a loss leader for our credit union,” said VP Marketing Joel Sarfati. “Product knowledge is critical to effective cross-selling, and our credit union offers employee refresher courses that cover these topics.” As a result, Montgomery County Teachers FCU averages 2.64 accounts per member and has posted 11.8 percent annual share growth as of September 30, 2005.

Understand member needs: It is important ask why your members are coming to the credit union to establish a depository relationship. Does your credit union segment its marketing message based on member demographics and promote pertinent products? Montgomery County Teachers conducts e-mail surveys and hosts focus groups to understand its members’ needs. “If we don’t understand our members, then we can’t develop products to serve them,” said Sarfati. “For credit unions to be successful, they must be able to add alternate ways for members to access their share draft accounts.”

Police and Fire FCU ($2.0B in Philadelphia, PA) sends direct mail to specific member segments throughout the year that emphasizes the benefits of the share draft account. “Instead of predicting when the need will arise, we want to constantly promote our message so that Police and Fire FCU is the first financial institution that comes to mind when there is that initial interest,” said Mike Marcin, director of marketing. The credit union plans to send 48 direct mailings in 2006, which may seem high, but Marcin explains that Police and Fire FCU does not advertise through alternate media channels such as radio, television or print.

To encourage responses from its direct mailings, Police and Fire FCU offers members various incentives to open related share draft accounts. While promotions vary, the credit union will typically offer a member $15.00 for opening a debit card account and $15.00 for establishing a direct deposit relationship. It has even purchased luggage as an incentive. However, according to Marcin, cash tends to perform better than other promotions.

By understanding member needs and by delivering related products and services, Police and Fire FCU ranks ninth in the credit union industry and second for credit unions over $50 million in assets with 4.09 accounts per member. Its goal is for members to have five or six active accounts after belonging to the credit union for three years. “If our members stay in the region, we are confident that Police and Fire FCU will remain their primary financial institution if we’ve established a depository relationship with them,” said Marcin. Police and Fire FCU documented 8.4 percent annual share growth as of September 30, 2005.




Feb. 20, 2006


  • Same old over-hype about CU checking accounts and PFI. I doubt your chart. Other info from NCUA shows about 25% of members have CU checking accounts. PFI -- an old fashioned, 1930s banking model based on expensive tellers and a lot of manual transactions. We need to hear something new. Consider the internet banks. They pay very high rates on savings accounts because they do NOT have tellers. CUs used to be low cost providers of services and pass the savings to the members. Now we have the same high cost as the old fashioned traditiional banks, and our rates are now low to show for it. Again, we need a new business plan. Something other than the out-dated PFI.