Perks To Entice Members To Park Their Cash

Purdue Federal’s new rewards program has brought with it an unexpected windfall in deposits.

When Purdue Federal Credit Union ($848.3M, West Lafayette, IN) launched its My Member Perks program in August 2013, the goal was to generate greater activity in existing accounts using carrots that would catch a member’s attention. In effect, the perks did something more. They also helped the credit union beef up total deposits by $46 million throughout 2014, a 6.51% annual increase.

As credit unions grapple with ways to encourage deposits, rewards programs offer a two-for-one deal of generating active credit union users who also have an added incentive to park their cash in a share or CD account. At Purdue Federal, the perks of active membership include rate bonuses for those accounts, discounts for loans, refunds of certain closing costs, and cash back for debit purchases. But as any credit union with a discontinued rewards program knows, the danger is making promises the institution can’t afford to keep. Purdue Federal spent two solid years reinventing its rewards program with all those things in mind.


Purdue FCU
Data as of 12.31.14

HQ: West Lafayette, IN
ASSETS: $848.3M
MEMBERS: 65,516
ROA: 0.72%

Although attracting deposits was a factor, we were looking for more activity in our member accounts that could contribute back to the program and make it sustainable, says Heather Nally, Purdue Federal’s vice president of sales and services.

The Perks Of Higher Status

By basing pricing perks on four graduating tiers of users (bronze, silver, gold, and diamond), the credit union has a built-in mechanism for attracting deposits. Bronze members qualify only for the credit union’s standard rates, but higher tiers earn rate increases on deposits as well as rate discounts on loans. As the table above shows, the perks increase significantly as members become more active. ContentMiddleAd

To determine a member’s status, which fluctuates monthly, the credit union assigns points based on account activity from the previous month. Although the number and value of loans, CDs, and share accounts a member has help determine status, the use of other services, such as mobile banking, debit cards, and paperless statements, also factor in that calculation. As a result, members with six-figure bank balances who use Purdue’s other services minimally or not at all won’t land in the top tier, though they may merit silver status.

The five categories that contribute to a member’s overall score include:

  • Number of transactions
  • Age of accounts
  • Loan balances
  • Share balances
  • Services and use (e.g., estatements, online banking, etc.)

That emphasis on overall credit union use might seem counterintuitive for encouraging deposits, but an earlier rewards program at Purdue Federal based exclusively on loan and CD balances didn’t affect deposits the way the new program has. One problem was visibility. Few members knew about the old program or that they were eligible for rewards.

A bunch of members were sitting with rewards points they didn’t even know were there, says Jackie Hoffman, vice president of human resources and marketing.

The new program, however, offers visible reminders of the rewards. Members in the top three tiers, for instance, earn $5 every month when they make at least 30 debit card transactions during the same period and have signed up for paperless statements. In 2014, these specific debit-driven payments alone totaled nearly $424,000.

Running tallies that show these and other types of perks earned each month and their total dollar value for the year appear on a new My Member Perks page at the top of every statement and can also be tracked online.

Overall, the credit union gave back more than $1.7 million to their members through the program in 2014. In addition to members seeing their own perks on each statement, this organization-wide fact is also highlighted on the main home page of the credit union’s website.

Watch And Learn

To hear Purdue Federal’s Nally and Hoffman discuss the creation and subsequent value of this program in their own words, check out this video.

Encouraging Deposits

The prominence of this program is what gets people hooked on earning perks, particularly because the rate benefit for deposits and loans doubles from one tier to the next, the credit union says. Plus, even though a member’s status fluctuates monthly, the rate for a loan or CD gets locked in long-term.

They earn that benefit through the life of that certificate or loan, Nally explains.

Consequently, a member who usually qualifies at the silver level has a rate incentive to open a CD or take out a loan after a particularly active month that bumped up the member’s status to a higher tier. This quest to raise their status and reap more rewards may also be enticing members to make the credit union their primary institution.

More people are using their checking accounts to get the debit card giveback.

Jackie Hoffman, Vice President Human Resources Marketing, Purdue FCU

The debit card perk gets them to use the checking account more often, and we know we have members with a checking account at another institution, Hoffman says.

Members shifting money from other institutions to a Purdue account may explain the credit union’s unexpected $10 million windfall in deposits from September to October last year.

That increase wasn’t typical for us in October, and some of that $10 million is because more people are using their checking accounts to get the debit card giveback, Hoffman says.

A Shift In Behavior

Attracting deposits, though, is only one factor in the program’s sustainability. For the credit union to maintain the program or add perks, members need to shift their behavior and become active users, which appears to be happening.

Data from the entirety of 2014 showed the bronze category declining by 268 members compared to when the program began, while the numbers for each of the three highest tiers increased, with 1,158 new silver members, 959 new gold members, and 329 new diamond members.

Source: Purdue FCU

Sustainable Promises

Although Purdue Federal doled out more than $1.7 million in perks in 2014, funding has jumped 20% this year, with the largest percentage increase earmarked for CDs, a testament to the program’s success in attracting deposits. Purdue Federal spent about $26,542 on the CD interest rate perk about $7,100 more than expected in 2014 and has since doubled that budget to $55,494 this year. The debit card cash back, the program’s most popular and visible perk, is expected to come in largely on budget at about $420,000, with a modest 8% increase in funding for 2015.

Accurately forecasting a reward program’s costs is like chasing a moving target. A successful program prompts members to change their behavior to win more perks, but if more members than expected qualify for those rewards, that can end up costing the credit union money.

To keep the program sustainable, Purdue Federal plans a two-pronged approach to rein in costs. One idea is to add short-term perks members can qualify for only during a set period. Those perks will target certain tiers to encourage more members to shift to a higher level. The credit union plans to experiment with this approach by offering free retailer gift cards in December, waiving the purchase fee only for members in a particular tier.

Another possibility is to assign higher points for desirable behaviors to encourage more of them. For instance, some of Purdue’s members live in areas where the credit union doesn’t have any branches. Instead, those members transact their business at other cooperatives where Purdue Federal has shared branching agreements. By assigning more points for that behavior, the credit union hopes to encourage those members to stay with Purdue Federal instead of joining a different institution in their area.

Across 2015, the credit union will continue to closely track the program to help determine what, if any, tweaks may be needed in 2016 to ensure a successful and sustainable rewards structure for its members.


November 20, 2014

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