Overdraft Privilege: Responding to Your Members

Competition is fierce. How are you staying ahead of the game? Your members hold the key to keeping you on top.




Members are at the heart of the credit union. The question is: Are credit unions aware, or even listening, to members’ wants and needs? Competition is fierce. Today’s members are inundated with messages regarding their finances from various banks, other credit unions and even those you may not consider competition, such as Wal-Mart, 7-Eleven and Western Union.

Now, more than ever, it is important to keep a finger on the pulse of what is important to members so they are served in the best possible manner.

What are your members saying?

Members say a number of things to you, whether by actual words or their actions. When members find themselves in a financial bind, evaluate what they do. They may come to you to discuss their options, ask for a loan, overdraw their account or even visit the local payday loan counter.

The latter is the most devastating to their financial future. By paying attention, you may find that your members are interested in an overdraft privilege program. That is likely the solution. When members find themselves in a financial bind, an overdraft privilege program provides a safety net. This service is not a designed to be relied upon, but one that exists to help during financially straining circumstances.

Why do members welcome overdraft privilege programs?

There are a number of reasons why members freely adopt such a program. A few of those reasons include:

  • Covering unintentional mistakes – Mistakes are going to be made. Members may forget to record an item or miscalculate their balance in their register. When this happens, overdrawing their account is a non-event because their rent, car note or merchant check will not be returned.
  • Maintaining credit worthiness – Returning to the retailer to make good on a check is an embarrassment to many members. Having an overdraft privilege program on their account frees members of the humiliation. At the same time, because the check was not returned, the members are saved poor marks on their credit reports.
  • Providing a financial service – Overdraft privilege is a safety net for many members, and knowing that it is available if ever needed is a relief to many.
  • Offering peace of mind – Members are compelled to stop at payday lenders when in particularly tight situations. Overdraft privilege programs, coupled with financial counseling, prevent members from getting into further financial trouble.

How to communicate the benefits.

Training is key when implementing any new program, but especially an overdraft privilege program. To start the program out on the right foot, employees need to have a thorough understanding of overdraft privilege’s benefits and the problems it will solve for members. By clearly identifying the problems it solves, it is simple to proceed with a thorough training experience.

In addition to training the credit union’s member service staff, remember that “back room” employees need the same training. When every person in the credit union is on board, the overdraft privilege program will be even more successful.

How to kick off an overdraft privilege program.

Educating members is crucial to member adoption. Before the program is rolled out, prepare them for what is coming. This can be done through a letter campaign, classes held within the credit union and face-to-face interaction with member services staff. When members know how the program works, it becomes an even smoother process

How can overdraft privilege benefit credit unions?

Besides member satisfaction, an overdraft privilege program can:

  • Streamline current operations with a straightforward system to monitor overdrawn accounts;
  • Create a structured process for communication with overdraft privilege members, which keeps charge-offs to a minimum;
  • Increase non-interest income by 50% to 300%; and
  • Gain and retain more members.

A win-win situation

This is a program that keeps members in mind, keeps them loyal and keeps credit unions competitive in today’s marketplace. With overdraft privilege, members have peace of mind in knowing that their credit union is looking out for their best interests, and the credit union knows they are offering members the services they need.

JMFA is a leading provider of overdraft privilege programs, servicing more than 2,000 financial institutions in 49 states and Central America. JMFA is also recognized nationally for training, incentive and earnings enhancement programs as well as product, service, pricing and technology improvement consulting. To learn more, visit www.JMFA.com or call 800-809-2307.




Feb. 13, 2006


  • Great program to increase member satisfaction!
  • Based on anecdotal evidence from the preponderance of credit unions who have implemented this product, you may wish to reconsider the member education advice.
  • I'm having a hard time seeing OverDraft Privilage as anything but a sign of CU staff's failure to EDUCATE AND SIGN UP members for overdraft protection loans, which I still consider to be more fair to the CU member, and a better risk management tools for the CU. Courtesy Pay seems like 2nd rate solution to members making solutions or needing piece of mind. BAsically, as I see the, the fee income is astronomical and the losses are not as high as the fee income. Is this what a member owned co-op is about? It seems to me to taking advantage of human nature (to make mistaskes in a checkbook register) as much as payday lender take advantage of the human weakness to fail to manage their funds and their WANTS. C. Warden, CCUE