A new report from Filene Research Institute in Madison, Wis. aims to show credit unions how to keep non-interest income coming in while continuing to offer valuable services and refraining from turning members off by fees.
“In Search of Member-Friendly Noninterest Income,” written by Filene Research Director Ben Rogers, reveals that 66.7% of surveyed credit unions said credit insurance or debt protection coverage is a “very important” or “important” noninterest income source based on importance to income, aside from overdraft fees and interchange income. This was followed closely by checking account fees, with 62.1% of respondents naming it as a top source.
The majority of respondents (94.4%) named GAP coverage as a “very important” or “important” noninterest income source based on value to members, also without including overdraft fees and interchange income. Credit insurance or debt protection coverage came in second in this category, with 92.1% of respondents listing it as a high-ranking source based on value to members.
Filene said credit unions must consider that while noninterest income in the form of fees and service charges is essential, they should weigh fees and service charges in the context of how transparent and member friendly they can be.
“Fee income is not going away and is probably going to be more important as time goes on,” Rogers said. “But credit unions should be uniquely concerned about their fee practices because their mandate is to be sustainable and profitable but not to the detriment of their member-owners. Fees at credit unions should be transparent and freely chosen, and they should add value to members.”
All surveyed credit unions finished in the top third in noninterest income between 2008 and 2011, as well as had assets between $50 million and $2.5 billion, more than 25 basis points of return on assets in three of the four years between 2008 and 2011, and net capital higher than 7% in all four years.
The report also contains case studies on four of the participating credit unions: the $181 million Texell Credit Union in Temple, Texas, $1.1 billion Idaho Central Credit Union in Chubbuck, Idaho, $98 million Texoma Community Credit Union in Wichita Falls, Texas and $1.2 billion Local Government FCU in Raleigh, N.C.
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Natasha Chilingerian
Natasha Chilingerian has been immersed in the credit union industry for over a decade. She first joined CU Times in 2011 as a freelance writer, and following a two-year hiatus from 2013-2015, during which time she served as a communications specialist for Xceed Financial Credit Union (now Kinecta Federal Credit Union), she re-joined the CU Times team full-time as managing editor. She was promoted to executive editor in 2019. In the earlier days of her career, Chilingerian focused on news and lifestyle journalism, serving as a writer and editor for numerous regional publications in Oregon, Louisiana, South Carolina and the San Francisco Bay Area. In addition, she holds experience in marketing copywriting for companies in the finance and technology space. At CU Times, she covers People and Community news, cybersecurity, fintech partnerships, marketing, workplace culture, leadership, DEI, branch strategies, digital banking and more. She currently works remotely and splits her time between Southern California and Portland, Ore.
