Pruning the Membership Tree


Strong member relationships are highly prized. If we didn’t already know this, all the postcards from various financial institutions offering people hundreds of dollars to open an account with direct deposit should have given us a clue.

Not all growth is good

Yet, despite knowing how much others are willing to pay to obtain the business of your members, you need to face a sad truth: not every member in your credit union is fully engaged and you may even need to let some of them go. Cutting off memberships can be discouraging and painful, especially when board expectations and employee bonuses are tied to membership growth goals. It feels like a step backward.

Yet growth has its downsides, too. Gardeners, for example, recognize that not all growth is good, since too much of it in the wrong direction can tax the resources of a plant and make it less fruitful. A good gardener knows when judicious pruning will help a plant flourish; just the right amount in the right place, taking off no more than necessary. When it comes to credit union memberships, knowing when to say goodbye requires a similarly delicate touch.

The indirect member

Although your credit union strives to be each and every member’s first choice for a primary financial institution, the reality is that you won’t be. Of course, you don’t have to be number one with everybody to have both a viable business and good member relations. Serving as a backup financial institution can still be mutually beneficial for both parties.

For example, many people obtain an indirect auto loan with a credit union other than the bank with which they usually do business, and this works out fine. The member realizes their dream of getting a car at a competitive loan rate, your credit union earns interest income they otherwise would have missed out on, and that’s a win-win.

While an indirect member always has an opportunity to develop a deeper relationship with your credit union, they may choose not to for whatever reason. That is their right. If the indirect member does not seek other products and services, then once their loan is paid off, the member will have just a share account with a nominal balance remaining.

Using fees to prune the tree

Should your credit union be obligated to hold that share account open month after month until dormancy status is reached, knowing there is a monthly cost to maintaining a membership, even one no longer engaged? Or would it be a better outcome for your credit union to hasten account closure with a monthly fee program until the account is zeroed out?

I would suggest that the latter option makes more sense, and you need feel no guilt about it, given that: (1) their routine banking affairs are obviously being handled elsewhere, (2) you have already made a good faith effort to get them more fully engaged as members and they displayed no interest, and (3) they have likely forgotten about the share account anyway.

Of course, you will have to give members adequate advance notice of any fee schedule changes, so what would a fee program that addresses these kinds of situations look like? Since many credit unions have a minimum $5.00 share balance requirement to start a membership, it makes sense to parallel that with a $5.00 monthly fee to unwind an unused membership.

Be careful to not cut the wrong branch!

The target of the fee would be members who have nothing other than a basic share account below a certain balance, and who are not doing anything else with you. Your credit union would decide where that fee-waiving threshold balance should be, whether $100, $200, etc. It’s a given that inactive indirect members should be removed, but since you’re looking at the whole credit union, make the fee age-restricted so as not to target children, who are the future of your credit union!

Before closing any memberships, you’ll also want to evaluate member activity (last transaction date, etc.) to ensure you do not drive away members who have deposits and withdrawals coming out of their single share account. These may be older and loyal members who just don’t have a lot going on. You’ll also want to ensure that the single share account is zero balance and is ‘clear to close,’ meaning that the member doesn’t owe the credit union for an overdraft or something.

Over time, this gentle pruning of the membership tree will save your credit union a considerable sum, considering that even for members on e-statements, there is a monthly maintenance cost per membership, somewhere around 56 cents when this went to press. When you multiply that amount by several hundred members and by 12 months, the amount saved could be several thousand dollars per year, especially if postage costs are factored in for those not on e-statements. Depending on the size of your credit union, you’ll want to generate lists of recommended membership closures either monthly or quarterly.

Keep the tree healthy

How is it with your credit union? Have you been holding on to every last member, no matter how inactive, hoping they’ll become engaged at some point? Or do you already have a process in place to remove members who just aren’t that into you?

If you have not been addressing this issue in an organized way, start assessing the financial impact by creating some custom reports determining how many members have just a single share account, how many of those are at or near zero balance, and how long it has been since they completed a transaction. You may be surprised by what you find.


  • George Hopper

    George Hopper is a Data Analyst at BlueOx Credit Union who has been helping credit unions measure success and their progress toward it for the last ten years.

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