By Ray Birch
MOON TOWNSHIP, Penn.—Clearview Credit Union contends that the standard free checking account is no longer good business, and that a relationship-priced product—with a $10,000 minimum average monthly deposit balance to avoid a fee—is the better way to go.
The $1.1-billion Clearview recently introduced Absolute Checking with just that pricing. It says it is structured to drive deeper relationships.
“I have been in credit unions for 35 years and I was here when we started offering checking in 1983,” said VP of Marketing Ralph Canterbury. “I think there still is a place for free checking for a certain group of people you can’t otherwise serve. However, I don’t think that the classic free checking can be a driving force in credit unions anymore. It’s about impossible to make money on that account. It can’t be the go-to product. The checking account needs to pay for itself and also deepen relationships.”
The interest-bearing Absolute Checking offers a package of services through Econocheck, including: cell phone protection of up to $300 of replacement or repair costs; identity theft protection; buyer’s protection that covers items for 90 days from the date of purchase against accidental breakage, fire or theft; travel and money-saving discounts from local and national businesses; cash-back debit rewards, and discounts at online retailers.
Nudging Members
The account also offers online bill pay, a loan interest rate discount, overdraft protection, eight surcharge-free foreign ATM transactions per month, and accidental death and dismemberment insurance.
To get that package of services along with a small monthly dividend and avoid the $5 monthly fee, members must maintain a $10,000 average monthly deposit balance or a $20,000 average monthly balance that includes loans and deposits.
“We realize that a lot of people don’t have $10,000 to keep on deposit with us, which is why we have the $20,000 combined monthly balance option,” said Canterbury. “Most people have a car loan and a mortgage—again, we are trying to deepen relationships.”
To nudge members toward its new account, and to remove the complexity and confusion surrounding its previous checking offerings, Clearview consolidated its previous seven checking accounts, including eliminating its old free checking account that paid a dividend and offered some benefits, such as limited free foreign ATM transactions.
“We had slew of different checking accounts that had added up over the years,” said Canterbury. “They were really becoming a burden on the organization to maintain, and a number of these accounts were losing money. We decided to consolidate these accounts and move in a different direction.”
Clearview, too, made the “difficult” decision to automatically move all of its 58,000 checking account holders into Absolute Checking. Members were sent several communications that the change would take place August 1, and urged to call the credit union if they had any questions or issues. The credit union also posted a great deal of information on its website about the change, including an FAQ page.
The FAQ page calls the move to Absolute Checking an “upgrade,” and one FAQ says, “In order to create a smooth transition as our previous account types are replaced, we’re happy to automatically upgrade your current checking account to an Absolute Checking account, so you can enjoy even greater benefits and value. The Absolute Checking account offers benefits that help better protect you and your family, save you money, and reward you for the purchases you make every day.”
While the accounts were not promoted, Clearview created two other basic checking accounts for members who were dissatisfied with Absolute Checking.
“We have given them options if they decide to leave Absolute Checking,” said Canterbury.
The CU is offering Basic Checking, which is free, pays no interest and has minimal charges, such as for a box of checks. Simple Checking pays interest and has a few of the same benefits offered by Absolute Checking, such as a limited number of foreign ATM transactions a month, free bill pay and debit rewards. But to waive a $3 monthly fee members must complete five checking transactions or contribute $500 or more monthly in direct deposits.
Canterbury said it took more than a year for the credit union to create plans for the change and then move on them. He said Clearview was prepared for some members to be disgruntled about being automatically moved into a new checking account that could carry a monthly fee.
“We have been very open with them, and have been sending letters for a while,” said Canterbury. “The communication made it clear that members still have an option if Absolute Checking is not the right product for them.”
Phone Calls
Canterbury said the credit union was ready to field a lot of phone calls, and for some backlash on social media.
“We have had probably 10,000 calls so far, and of that probably 1,500 people asked to be moved into one of our other two accounts,” explained Canterbury. “That’s roughly 2% of the people we moved into Absolute Checking. When you make a change like this, Econocheck says you can expect a 20% attrition rate, meaning most will not leave the credit union, just move into another account. I think we have done well so far.”
Canterbury said that calls from members who are concerned, upset or angry over the move have slowed dramatically, but that he does expect more calls to come once the first $5 fee shows up on some statements at the end August.
“We know that people don’t like to be told what to do. But again, we will handle that by talking to our members,” he said. “I know we live in the age of digital communication, but talking to people over the phone and explaining their options and the credit union’s position has worked very well so far.”
Clearview, too, will rebate any fees incurred by members in the first 90 days of the checking change if they are dissatisfied with Absolute Checking and move out of the account.
Impact On Members
Canterbury said the credit union looked at the impact of allowing members to initially choose among the three accounts, instead of automatically shifting people into Absolute Checking. But he said that Clearview determined that would be a huge undertaking
“It would have been a logistical nightmare—asking people to get back to us and tell us what they want,” he said.
A number of analysts have been forecasting that credit unions can expect a flood of unprofitable members to open free checking accounts as banks began eliminating the product offering. In its case, Clearview said it could not wait any longer.
“We are quietly happy about the response to Absolute Checking and automatically moving the checking base,” said Canterbury. “We knew some people would be angry about this, and we understand that. But overall the response has been pretty positive—probably better than we expected. As credit unions know all too well, there are some members who use us for very little. We have what we think is a great product members can use for just $5 a month if they can’t maintain the necessary balances. And, if this is something they can’t afford, they have alternatives.”