By Ray Birch
SAN DIEGO—While a credit union that’s dangling a certificate paying a whopping 9.5% rate said it did so primarily to celebrate its 95th anniversary, it’s also reporting several side benefits, including $3 million in new money and 200 new members in less than a month.
As part of the promotion, the $3.5-billion California Coast CU has put guardrails in place on its five-month “Celebration Certificate”—including that the funds must be new money, deposits are capped at $3,000, and each member can only open one of the eye-opening accounts.
Members must also have an “active” California Coast checking account that takes e-statements, or one of several other qualifying accounts.
“It's our 95th anniversary this year,” said CEO Todd Lane. “California Coast Credit Union was started in 1929. Five years ago, when we celebrated our 90th anniversary, we had a 9% CD.”
CEO Todd Lane, who noted the credit union offered a certificate paying 9% when it turned 90, said the new 9.5% CD is a way to reward members.
“We're five years away from our one-hundred-year anniversary. We are the oldest financial institution in all of San Diego County. Again, this is just a part of our overall celebration of our founding,” Lane said.
Formed by Educators
The credit union was formed in 1929 by educators in the San Diego Unified School System, the largest school district in San Diego County.
“Teachers back then took money out of their own pocket during the Great Depression to capitalize this credit union,” Lane said. “In the early ‘90s we went to an expanded field of membership, which a lot of credit unions did at that time. We now have a community field of membership and have changed our name to California Coast.”
Todd Lane
By late May, Lane said the promotion had attracted more than $3 million.
“Remember, these are small-dollar certificates with the $3,000 limit,” Lane noted. “So, we have brought in a lot of small certificates in a very short time.”
Helping With Liquidity
While the move was made to reward members, Lane said it is also helping with much-needed liquidity. As CUToday.info has extensively reported, many credit unions have been facing a liquidity crunch.
“So, this fits well with our needs, as we are always looking for ways to bring in new money,” Lane said. “We're getting lots of attention. We’ve enrolled a lot of new members from this, as well, which is great. In a short timeframe, we’ve had over 200 new members join just from this certificate promotion.”
Lane said California Coast will likely run the offer throughout the summer and into the fall.
“We're playing it by ear. But we intend to celebrate our anniversary the entire year,” he said.
Stronger Relationships
Lane contended the offer is good for building stronger relationships with existing members and enrolling new members who won’t just leave when their CDs mature, despite the higher cost of funds.
“It's an attention-grabber for sure, the 9.5% rate,” Lane said. “And we are not rewarding members that have a ton of money with us. We are not getting those people who are just shopping for the highest rate, especially since the CD is tied to a checking account. We tied it to a checking account because we want the relationship. We want an opportunity for new and existing members to get to know us better and see us as their primary financial institution.”
The Qualifying Criteria
If members don’t have a California Coast checking account, they can still qualify for the 9.5% CD by having a money market account, regular certificate or IRA certificate with a minimum balance of $5,000 at the CU. Individuals can also have a funded consumer loan that isn't a share secured loan, certificate secured loan or credit card.
Members are paid the 9.5% rate as long as they meet one of one of the above criteria within the first 30 days of opening the account. Otherwise, the account pays 0.10% APY for the remainder of the term.
“In this current economic environment, you have lots of large depositors that are just moving hot money and they have no intention of becoming an engaged member,” said Lane. “Anytime you see a credit union or bank tie a CD promotion to a checking account, they want that new relationship and a deeper relationship with existing members.”
‘A Big Celebration’
What will California Coast do to mark that 100-year anniversary that is just five years away?
“I think you can pretty much bank on the fact we're going to offer a 10% CD,” Lane said, even if rates drop again to rock-bottom. “That's going to be a big celebration for this credit union.”