"And, of our own members who had checking with us and converted to this account, the majority have brought in additional funds. Suddenly, assets that were not at the credit union materialized from elsewhere," he said.

Most reward checking accounts require the member maintain a high balance; however, Clearstar's product requires no minimum balance and has no monthly fee. Instead, Clearstar relies upon required electronic transactions, which Van Duzer said creates a "sticky" product loyalty that will keep members on board.

The account requires that members meet the following monthly criteria in order to earn the 6.10% yield:

oComplete 12 debit purchases, and

oReceive statements online, and

oSet up at least one regular ACH transaction, either direct deposit or an automatic payment.

While the account requires significant electronic participation, the benefits seem too spendy to break even: not only does the account pay an outrageous yield, but Clearstar doesn't charge for out-of-network ATM transactions, and even refunds member ATM charges from other institutions up to $25 per month.

Despite all the bells and whistles, Van Duzer insists the account is profitable.

"The reality is, not all accounts are going to earn that rate in a given month, because they won't perform up to criteria. For February, I believe the amount we paid out averaged 5.4 or 5.5%. It's never going to equal 6.10% across the board," Van Duzer said.

And, the high rate is only paid on balances up to $25,000. Accounts with higher balances only earn 0.5%, to keep high balances in certificates and money market accounts, he said.

Additionally, the electronic transaction requirement creates interchange income, and the e-statement requirement further reduces costs.

"Based on our proformas, we will have a good net profit the first year. By year two, profits should triple," he said.

Van Duzer didn't come up with the magic formula himself; instead, Austin, Texas-based BancVue, offered the account proposal, complete with proformas.

BancVue is a consulting firm that currently only offers one product, a customized, high-yield checking account. Clients receive three main services when they sign on: comprehensive software, compatible with all core and vendor platforms, that tracks, compiles and reports all member activity from all sources; consulting services that recommend specific account qualities, like rate and requirements, based on competition and market demand; and marketing services for the account courtesy of Austin-based agency First ROI.

BancVue launched its first client product in October 2004, and has about 155 clients. Most are community banks, but about 10 to 15 are credit unions, said Chairman Don Shafer.

Shafer said he thinks most credit union and community bank leaders are unaware of major changes taking place in the deposit market, and his product fits the bill.

"You're seeing very interesting commercials on TV you didn't see 18 months ago. What I'm referring to is HSBC running an ad for a 6% savings account. And that's not all. Emigrant Direct has a 5.05% savings account. E-LOAN used to talk about mortgages, but if you watch their ads now, they're talking about 5.5% savings. E*TRADE, same thing.

"Now, if you look across to the credit unions of this country, what are they paying? Two percent or less. The challenge to the credit union world is, how are you going to keep money in your credit union, when your members can move it, with the click of a mouse, from two to six percent? What kind of person wouldn't do that?" he said.

BancVue is pounding the pavement at banks and credit unions across the country, offering the product and a sense of urgency to be the first to bring it to market.

Van Duzer wanted to be the first in Northern Nevada, so he approved the eye-popping promotion without even asking his board.

"My board had been made aware, through a recent annual strategic planning session, that we had a need to develop a high yield checking to fill out our product offerings. The board left the mechanics to me and senior management. I went to the board after the fact, and they reacted at first with a 'what?' But once they saw numbers, they were okay," he said.

The 6.10% APY is intended to be only a promotional rate, although Van Duzer said he intends to keep yields high enough to compete as a reward checking product.

"I might tweak it a little and lower it down the road, maybe if we're opening too many accounts or if my cost of funds rises, but I don't want any rate changes to backfire. We're going to be keeping a close eye on the market, and on competitors' products. There are some high-yield checking products at some of the large banks. They have higher restrictions, so we're not too worried about them, but we're still looking at rates," he said.

Clearstar used newspaper as its primary advertising vehicle, running full-page ads in the coveted back page location, which "always gets us a good response," he said. The credit union has also done some direct mail targeted to neighborhoods near branches, and has marketed to existing members. –[email protected]