How To Eliminate Fees And Improve The Member Experience

Coastal FCU cut 20 fees worth $600,000 in annual income. Here’s how the credit union will make it all back — and then some.

The Raleigh-Durham metropolitan area is the second largest in the state of North Carolina, with a population of approximately 2 million. Because of its size and the number of jobs that have sprouted up in this part of the country, it’s not surprising the market is well-served by big national banks such as Bank of America, Wells Fargo, and PNC, as well as large regional outlets BB&T and SunTrust.

So how’s a credit union supposed to stand out? Listen, to start.


Coastal FCU
Data as of 12.31.16

HQ: Raleigh, NC
MEMBERS: 230,216
ROA: 0.72%

We hear the same things from bank customers all the time, says Joe Mecca, marketing strategy and communication manager for Coastal Federal Credit Union ($2.8B, Raleigh, NC). They charge too many fees, their pricing is not good, and their service is awful.

During its 2016 strategic planning session, Coastal reviewed its fee schedule and decided to cut the 41 it had in place to 21 effective Jan. 1, 2017. In 2016, those fees generated approximately $600,000 in revenue.

Stick To Principles

One of Coastal’s core principles, according to Mecca, is a commitment to friendliness and fairness, which includes maintaining operational transparency and fair pricing. So, when the senior management team and pricing committee came together to eliminate fees, there were obvious candidates from which to choose.

Full List Of Fees Coastal Eliminated

  • Overdraft Transfer from Savings and/or Money Market account
  • Overdraft Transfer from Line of Credit
  • Official Check
  • Incoming Wire
  • Call Center Balance Inquiry
  • Verification of Deposit
  • Account Research
  • ATM Card Replacement
  • Dividend Checking
  • Early Account Closure
  • Deposit/Payment Item Returned
  • Receipt Copy
  • Statement Copy
  • Official Check Copy
  • Check Copy
  • Interim Statement
  • Foreign Address Service
  • Mail Returned for Incorrect Address
  • Stop Bill Pay Transaction
  • Check Cashing

One of the obvious choices was the overdraft transfer fee, which had been $3. Although the overdraft service was a helpful tool for members to avoid nonsufficient fund fees and the credit union offered the service at a lower price than some of its bank competitors who charge up to $12, according to Mecca Coastal still received negative feedback from members.

They don’t care if it is cheaper, Mecca says. They want you to take care of the fee.

Rather than reversing fees like the overdraft transfer every time a member asked, which then required employee time and resources, the credit union recognized it made more sense to eliminate the fee entirely.

Other fees that got the ax included an incoming wire fee, balance inquiry fee, and a dividend checking fee. Coastal didn’t always charge the latter two fees, and the incoming wire fee created unnecessary friction in the member relationship.

We asked ourselves why we were putting up a barrier for people who want to deposit money in the institution, Mecca says.

Coastal cut fees that members didn’t frequently run into, yet when they did, it hurt the overall member experience, Mecca says. Eliminating these fees could clearly dent the institution’s bottom line, but Coastal considers the elimination a member benefit in the long-run.

We think charging fewer fees and making it easier for members to do business with us will go a long way in generating good will and making us a more attractive option, Mecca says.

Click on the graph below to visit Peer-to-Peer Analytics by Callahan & Associates and compare your credit union’s performance against Coastal or any peer group of your choosing.

Coastal’s fee income per member has historically lagged below asset-based peers and continues to fall. At year-end, fees comrpised 7.5% of the credit union’s total income.

Coastal Tells Its Story

This year marks Coastal’s 50-year anniversary, and throughout 2017, the credit union has planned brand-focused marketing messages to celebrate.

We want to celebrate our anniversary by tying our marketing into our brand, Mecca says. Much of what we focus on this year will be about how much we give back to our members.

According to Mecca, the credit union has already started quantifying its member giveback. Each year, as the credit union prepares to pay out its annual patronage dividend, it calculates the ways it helps its members save money, adds it up, and publishes one big number. In 2015, Coastal calculated its member giveback at $16.2 million. Eliminating $600,000 worth of fee income will surely add to this total.

Not only will we be able to say we saved members this much money by not charging fees, we’ll compare it to what they would have to pay for the same services at different institutions, Mecca says. In that sense, we’re potentially saving members millions.

They don’t care if it is cheaper. They want you to take care of the fee.

Joe Mecca, Marketing Strategy & Communication Manager, Coastal FCU

Still, the loss of $600,000 in fee income is no small thing. But, says Mecca, it’s the cost of doing business.

If the fee elimination makes the credit union a more attractive financial provider, helps it add new accounts and credit cards, drives higher account usage, or increases member satisfaction and promoter scores, that’s a win. And although Mecca recognizes it will be hard to correlate some of these growth metrics to the fee reduction, its impact as a differentiator will loom largest.

We think eliminating these fees is going to have enough of an impact in helping us tell our story and attract new members that we’ll make up the loss on business, he says.

March 1, 2017

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