July 9, 2012

As more banks charge high fees for using ATMs and checking accounts, many credit unions are taking a different route. While evaluating account structures, executives at $575 million Tropical Financial Credit Union, with 55,000 members, Miramar, Fla., noticed members do not have the balances they had prior to the recession.

“We took a hard look at how our offerings fit with our members’ needs within the current economic landscape and knew this was our opportunity to stand up for the consumer and do it better,” says Richard Helber, president/CEO.

The CU decided to change the focus of its checking accounts from balance-centric to usage-based.

“Ever since the financial crisis hit, financial institutions around the country have been trying to figure out how to respond to it,” says Helber. “Banks are looking for profit while credit unions are looking to change to serve members better.”

To meet those needs, Tropical Financial CU has created four new checking options.

First is MyFree Checking, an account for basic transactions with no service charge and no minimum balance requirement. Members get free online banking, free bill-pay, and a Visa debit card, but pay the standard overdraft protection fees and a foreign ATM fee.

Second is MyComplete Checking, an account for members who need more and want to save more. This account includes no foreign ATM fees, immediate availability on deposits, and lower overdraft protection fees. The CU charges a $10 monthly fee that is waived when members use two of four services: direct deposit of $500 to checking or savings, five online bill-pays, 10 or more debit transactions, or a minimum balance of $1,000, all on a “per month” basis.

Student Checking is another option for those in school. This account has no minimum balance, no monthly service fee, free foreign ATM usage and lower overdraft protection fees. Parents can set a limit on debit card withdrawals that gives them control on how much money their children can access.

My Checking is an option for members trying to get back on track with their finances. There is no minimum balance, but the account has a $10 monthly service fee. There are limits on deposit availability and overdraft protection is not available. After one year of maintaining good standings, members can switch to a different checking account option.

“My Checking is more of a credit restoration type of account,” explains Helber. “This is good for people who do not qualify at other financial institutions to open a checking account.”

As times change, Tropical Financial CU is looking to increase penetration of checking accounts and grow 4-5 percent in new accounts annually.

“We know we will lose accounts, but we hope to pick up many more,” states Helber. “Some accounts are just sitting there not being used; that costs us money.”

He explains that members think credit unions make money on checking account balances, when revenues are currently being driven more by transactions.

“What is really going to drive revenue is lowering prices of overdraft fees and ATM fees; but with an increase in use, it will push up the interchange and other fees,” he points out.

The change went into effect July 1, so Helber expects to see the impact later this summer.

“Overall it is not a huge change and we are receiving favorable reaction from our members,” adds Helber.

Lauren Etter is a CUES editorial intern who studies communication at the University of Wisconsin-Madison, Madison, Wis.