Share drafts are probably the first, and perhaps the most important, product members will use with their credit union. Many credit unions over the past year used share drafts as a tool to gain members, highlighting both free and rewards checking accounts. The share draft account is how the member interacts most with the credit union, and if members are happy with their share draft account, they’ll likely be more willing to take on other products from their financial institution.
Credit unions increased share draft penetration in the first quarter of 2012, with momentum carrying over from fourth quarter’s grass roots movement toward smaller institutions, according to data from 7,035 credit unions reporting in Callahan & Associates’ FirstLook program. The 5.6% growth in the number of share draft accounts was nearly three times greater than the 1.9% membership growth that quarter.
Share draft penetration was 50.6% as of the first quarter, up from 48.9% a year prior. One reason for this growth is the increase in membership. Annual membership growth was 1.9%, up from the annual growth rate of 60 basis points in March 2011. The other factor for the increase is organic growth, or growth within the credit union. The number of share draft accounts increased by 5.6%, nearly three times faster than membership growth. That means existing credit union members are opening new or additional share draft accounts.
As of March 31, 75.7% of credit unions offered checking accounts, up slightly from the 75.1% that offered them a year ago. The average share draft account balance also increased, up to $2,394 from $2,177 the same quarter last year, an annual increase of 10.0%.
Among individual states, share draft penetration varied greatly. Florida was the leader in share draft penetration with a rate of 62.1%, followed by Nevada and Washington, both with 60.8%. Colorado, and New Hampshire rounded out the top five.
Credit unions still have ample room to improve their share draft penetration as only about half of all credit union members hold a share draft account. Credit unions that can grow their member base while fostering organic share draft growth can help turn unengaged members into full-fledged profitable members.