By Ray Birch
WATERFORD, Conn.–One hundred bucks a year is not a lot to spend on each of your best members, says Charter Oak FCU, whose giveback program has been key to the credit union’s strong growth over the last 10 years.
The $100 is the annual giveback to each member who keeps $20,000 with the credit union, either in loans or deposits, or a combination of both. CEO Brian Orenstein said it’s a small price to pay for the return.
Charter Oak FCU paid out more than $618,000 in bonuses to members of its Gold Rewards program during 2019.
“We have had this program for several years, and while we give Gold Rewards members perks all along the year—like better rates—the year-end bonus is what our members consistently tell us they like most about the program and look forward to,” said Orenstein. “We get members stopping in every year thanking us, sending email messages, and even writing thank-you cards.”
The message the credit union often hears, too, from Gold Rewards members, is “you help us, we help you,” explained Orenstein.
That has translated into strong financial performance for Charter Oak, driven in large part by the additional business these members bring to the credit union, said Orenstein.
“Members outside Gold Rewards average about three services each. Gold rewards members average five,” the CEO said.
Over the last three years the $1.3-billion credit union has averaged more than $7.5 million in net income annually, and has remained profitable during the health crisis. ROA is .98% this year.
Doing the Research
Orenstein believes givebacks are critical to driving member loyalty, but only after doing a great deal of research to determine how much to give back at the close of the year, as Charter Oak did.
“You have to make the giveback something that is really noticeable to members, but you can’t give away too much,” he said. “We found giving each Gold Rewards member $100 is the right amount.”
Orenstein said the $100 is something members think about all year.
“They always ask us if we’re going to repeat the giveaway, and studies we have done indicate the dollars are why some of our best members stay with us,” he told CUToday.info.
Before the credit union launched its Gold Rewards program, it surveyed the market to see if any similar local offers were already in place.
“We wanted a member appreciation program, but we wanted it to be different,” he said. “In our markets no one was doing this and that is still the case.”
Strong Word of Mouth
Gold Rewards also requires members to have a checking account and direct deposit.
The program has steadily grown over the years, and Orenstein attributes that in part to word of mouth.
“Gold Rewards has grown a lot since we began offering it,” said Orenstein. “This year was the highest payout.”
The program began several years ago with about 2,000 participants. Today the total is 6,180.
“We probably add about 400 to 500 new Gold Rewards members each year,” said Orenstein, emphasizing the financial value these account holders drive back to the credit union. “These members represent about 50% of our entire deposit base and 40% of our loan base, even though they are about 11% of our total membership. We have to take care of these people.”
Net Income Remains Solid
And they are taking care of the credit union during the pandemic, added Orenstein. Charter Oak made $2.9 million in net income in the first quarter of the year and $1.6 million during Q2.
“We have been helping our membership a lot during the pandemic,” Orenstein said. “A lot of members are asking for fee waivers and loan payment forbearances. And we are accommodating them. But the pandemic has not dramatically affected our financial position.”
As for any potential budget areas targeted for cost cutting if the pandemic persists well into next year, Orenstein said, “I don’t think problems for us will get that deep. We have list of contingencies we can implement, but right now we have no plans to cut back. We are moving forward.”