Though there are two primary types of credit union charters - state and federal - how it's employed and whom you target can greatly impact your business.
The Federal Credit Union Act of 1934 opened membership acquisition to communities and specific group affiliations. But according to The Credit Union Times, these types of charters were seldom used in favor of occupational charters. In the last 10 years, however, credit unions with community charters have jumped in popularity from 17.9 percent to 35.8 percent. Usage rates of all other subcharters have dropped within the same time span.
Though members shouldn't see a difference in institutions whether backed by the state or the federal government, the local restrictions on your field of membership can affect marketing, benefits and member relationships.
Expansion vs. Closed Charter
Not only are there community or residential charters, there are also associational, occupational or a combination of multiple inclusion requirements. To expand or not to expand is a question that should not come without a heavy weighing of the pros and cons.
A strong point of traditional credit unions has been their ability to address the specific needs of members. Widening your target audience too much can make your unique selling points harder to convey. A difference in rates and fees, may not be enough of a lure for everyday Joe to join.
"When expanding, SEGs can suffer due to the shift in focus."
A marketing error commonly made by credit unions undergoing the switch is trying to be all things to all people, reported RepCapital Media. The Louisiana-based marketing firm instead suggests focusing on segments of the market that your credit union is sure it can serve.
Implementing new methods of communication can increase your marketing budget and be a financial blow if you aren't prepared.
Another caveat of expanding membership can be quality partnerships. While expansion is certainly a move that has tremendous potential, maintaining a positive relationship with your select employer groups is equally important. SEG members are already employed, and require few funds to onboard. As a company brings in new hires, often these new employees are introduced to the credit union during orientation, company-sponsored events or simply by word of mouth. The link between the credit union and members' employers also reinforces the need for valuable benefits that favor those stakeholders. When expanding, SEGs can suffer due to the shift in focus.
A closed charter on the other hand can limit growth. If restricting your member base to the employer group you are serving doesn't serve your institution's needs, you may want to consider broadening your inclusion policies.
Ultimately, it depends on what success means for your credit union and members. If bigger assets and more resources would better serve your needs, you may want to adopt one or more additional charter types.