Helping Members Attain Financial Independence

Inherent in Sharonview Federal Credit Union’s vision statement – Dreams Realized Together – is our commitment to work in partnership with our members. Like all credit unions, we exist to serve our members and build long-term relationships with them.

Part and parcel of being in partnership with members is guiding them to a state of financial independence. Some members need more help in that department than others, and it’s incumbent upon us to help all members achieve that level of financial freedom.

But how? Here’s a stepwise approach.

1. Member education is the short answer. And, like everything in this business, that starts with employees.

We’ve been transitioning for the past couple of years to better educating our staff to have more consultative conversations, as we call them, with members.

We want to help members make better decisions now and down the road. We’re not giving them a fish, as it were. We’re teaching them to fish. Our long-term message is: If we take care of you today, you’ll be a lifelong member. That’s the ultimate goal. It’s not a transaction we’re looking for; it’s a relationship.

2. Start with the FICO score. That’s the first thing we cover with members. We educate them on what it is and why it matters. We explain that it impacts how much they’ll pay in interest on loans, how much they may have to put down as a deposit on an apartment and a host of other things.

Like a lot of financial institutions, we get FICO scores on our members every month. So, we’re able to track their credit-worthiness.

3. Go analog. Our frontline staff – at the branch level and in our member experience center – can use that FICO data as well as an analog tool like an old-fashioned calendar to set members up for success. If we’ve made a loan based on a less-than-stellar FICO score, we’ll educate members on how they can improve that score and get a better rate. And we’ll make a calendar note to contact them in five or six months to check in after they’ve had an opportunity to pay several cycles of bills – their loan payment, their utilities, etc. – on time.

We tell them: “As your FICO score goes up, our risk goes down. And you can be the beneficiary.”

4. Do something a bank wouldn’t do. If members have been able to improve their FICO scores, we try to lower their interest payment to us. We will actually volunteer to refinance their loan at more favorable terms.

I know that’s a little – or a lot – different from the banking world. It’s beneficial for members, and it serves our long-term goal to do the right thing for them every step of the way. As a not-for-profit cooperative, we have the power to do that. It’s one of our value propositions and one every credit union should have to make the case for credit unions over banks.

5. Make someone happy. We really feel when we make our members happy, they tell others. We’ve heard countless stories about happy members referring their friends and family members to us. At the end of the day, there is no better advertising than satisfied members. That’s the best referral source – and the easiest way to grow market share.

We had a member denied for a signature loan for home improvement. Rather than just deny the loan and call it a day, our branch manager and member experience representative did a deeper dive to discover and explain why he was denied. We learned that the member had one car loan at a 23.99% interest rate and another at a 17.99% interest rate.

Here’s why member education is vital. This member didn’t realize how much he was actually paying in interest on his car loans. And that’s, unfortunately, not that uncommon.

We were able to refinance those auto loans into lower rates, which are now single-digit interest rates. We were able to lower his payments on both auto loans so that he qualified for the home improvement loan and still saved $350 a month. In addition, we were able to add a warranty to protect them because both vehicles were more than five years old, and the manufacturers’ warranty had expired.

So, the unsecured loan he wanted is actually paid for in the savings from the car payment. Plus, we saved him another $350. It was a remarkable case. Not only did we get just one loan approved – we got three loans approved and still saved him money.

This member’s plan is to take the $350 he’s saving and make extra payments to another credit card. And we’re going to continue to work with him. We set the calendar trigger in five months to bring him back in. We’re going to see if he can continue to chip away at that credit card on which he’s paying about 25% interest.

A denied loan actually turned into good news for this member. He’s on his way to paying off loans and achieving some financial freedom.

6. Be consistent. We want our members to learn these financial independence behaviors when times are good because, then, they’re better prepared in times of uncertainty. There’s a lot of uncertainty in the market right now. Now’s the time we want to try to get in front of members with our education message. Then again, we should be doing that all the time.

7. Start with staff. A credit union’s member education is only as good as its staff training and development. How do we ensure our staff is having these meaningful conversations with members? How do we train them? It’s on the job. It’s in the classroom. It’s web-based. It’s one-on-one. It’s ingrained in our culture. We keep it top of mind. We talk about it all the time. We share success stories within our institution to remind people of the power of member education. When employees hear these stories, it energizes them.

8. Budget basics. Getting away from debt is one of the most important components of financial independence. But there’s something else that matters, and we assist members with it, too. Our staff is trained to walk through a budgeting process and to encourage members to take control of their budgets.

Few people balance their checkbooks anymore – online banking has turned that into a relic – but we encourage members to look closely at what they have coming in and what’s going out. Income vs. expenses. We suggest they take a moment – monthly, if possible – to review the two. We encourage them to be disciplined, to know what they’re spending their money on.

Our online banking tools help show members where their money is going. We encourage everybody to use that tool. If members are concerned about their expenses relative to their income, we encourage them to talk to us.

Member education is part of the mission for many credit unions. And when we can make the communities around us stronger – one member at a time – then, everybody rises. There are few things we can do, as credit union employees, as impactful as helping members declare financial independence. It doesn’t make them less dependent on the products and services your credit union offers; it makes them better members.

Herb White is Chief Revenue Officer for the $1.8 billion, Indian Land, S.C.-based Sharonview Federal Credit Union.