Three Ways for Credit Unions to Overcome Decline in Deposit Growth

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Credit unions in the US have been witnessing a steady increase in membership since 2010. Average annual membership growth has been ~4% in the last 4 years. On the contrary, the deposit growth has shown a decline since Q3 of 2016. The deposit growth rate was recorded at 4.87% in Q3 of 2018 compared to 8.44% of Q3 of 2016.

Around 40% of the credit unions have reported a decline in deposits in 2018 which amounted to ~$3 billion on a YoY basis. Chartway credit union (Virginia) showed the highest decline ($120 million) in the deposits in 2018 whereas in 2017 Melrose credit union had the highest decline in deposits. To find more about declining deposits, refer to our article Are Credit Unions over-extended; Again? Impressive loan growth, Alarming deposit growth.


Focusing on increasing deposits is essential for sustainable and profitable growth strategies. With increasing, Federal Funds rate in recent years, achieving adequate deposit growth is the best way to manage the rising cost of funds to attain the lending goals with a lower borrowing requirement.

It becomes more and more important to bring in funds/deposits organically with rising rates and delinquencies. For competitive lending, credit unions must find ways to generate new deposits and retain existing deposits. Here are a few ways that could help in growing deposits for credit unions.

1. Changing Deposit Product Proposition

Thinking of new and innovative products has become a need of an hour. Redesigning existing products with new features can also do the trick as it did for a California based credit union with $500M of asset size and 30k members. They launched a new checking product with a low monthly fee of $6-$8 and loaded it with a lot of money-saving benefits. The salient features being offered are:

  • Rebate on all debit card transactions
  • Fee Waiver offer
  • Increased dividend rates
  • Special money-saving offers for Loans and Share Certificate rates
  • Value-added benefits

Within 6 months of the product launch, it has created strong interests among members. Credit union saw 20% conversion from the basic no-fee checking account to this premium checking account. Below is the impact post the product launch on credit union’s portfolio –

  • Average beginning balance for new accounts acquired through new product increased by 50% compared to older checking product
  • The low monthly fees alone helped credit union earn an additional monthly income of ~$50K
  • Debit card transactions were up by 30%
  • Average monthly balances have doubled

2. Deepen your Branch network

Adding new branches helps credit unions to expand their operations in new markets and attract new households and members thereby adding to the deposits with CUs. However, it seems growing branches for most credit unions is not a priority. The number of branches held by all credit unions was 21,830 in Q3 of 2017 and 21,874 in Q3 of 2018. Only 44 new credit union branches were added in a year.

Bigger credit unions are getting bigger and smaller credit unions are either shutting down or getting merged into larger credit unions. The numbers in the table below clearly show the trend. The credit unions with more than 10 branches have increased from 4.42% in 2010 to 7.92% in 2018 however credit unions with only one branch and smaller operations are experiencing negative growth.


17% of the branches belong to top 100 credit unions. The deposit growth rate for Top 100 is 7.34%, which is 1.5 times more than the national average.


3. Competitive Marketing Offers

Thinking through exciting marketing offers and offering them to the right members can accomplish a big win for credit unions. When a right offer is extended to the right member, it can entice the member to act and avail it thereby improving deposit balances with credit unions.These offers can be made in a variety of ways such as an introductory offer to new members where a joining bonus is awarded on a certain $s in deposits or a product bundling offer like one getting a fee waiver on credit card for on opening a checking account. Here credit unions can understand their members’ lifecycle, demographics, and transactional behavior to find the next best product for them. Identifying and forecasting a need for a deposit product at the right time for the member can help credit unions grow their balances.

Currently, many of the credit unions are introducing referral programs for member growth. On average, cost-per-acquisition for a member is around $100-$120 per new deposit account. Referral program often offers a cash benefit of $50 for referring and $50 for new member account opening, which is easier. Many of the credit unions have seen a positive impact on membership and deposit account growth using such referral programs.

Another way to keep their deposit balances from diminishing is to stop the members who are likely to leave the credit union. Sophisticated Attrition Models like the ones build by CU Rise can help credit union predict member attrition 11 times better than traditional methods. Re-engagement offers like providing free financial advisory services or monetary incentives on reactivation of their cards can go a long way in reviving relationships with lost members.