EAST WINDSOR, N.J.-McGraw-Hill FCU here now offers a money-management account that it says pays 16 times the national average APY. More than 1,700 of the accounts have already been opened.
The account, known as the S3 ("Save, Spend and Simplify") has no monthly fees and no minimum balance requirements. Direct deposit is required, but that amount can be as low as one cent per month.
The S3 account pays 1% APY on balances up to $25,000, and CEO Shawn Gilfedder noted that "we pay interest on dollar one." The 16-times-the-national-average figure comes from bankrate.com, where the CU looked at its rate in comparison with the overall national average in the marketplace on checking accounts.
While the account does include checks, the focus is on technology, including shared branching, mobile banking, ATM surcharge rebates and more. Gilfedder noted McGraw-Hill FCU isn't referring to it as a checking account, but rather a "personal cash management" account.
"We're looking for the relationship," said Gilfedder. He noted that by coupling technology with the account and promoting operational efficiencies, this "helps us pay the premium over the average cost of funds," which he said is between 65-75 basis points for most CUs.
He added that MHFCU's strong financial position means "we can afford to help our members align themselves with the right product and provide them with a return that pays them for their participation."
The 1% APY is also meant to better establish McGraw-Hill in one of the nation's most competitive marketplaces: New York City. Gilfedder noted that Chase offers an account that charges $12 per month ($144 annually), with a minimum balance of $1,500. "The equivalent negative APR on that is almost 14.5%," he said. "We're helping consumer realize that you can actually put money in your pocket as opposed to being apathetic about your financial relationships. You have to be more conscious today to provide yourself opportunities to save."
McGraw-Hill FCU currently serves more than 20,000 members with $293 million in assets.
Gilfedder said that so far the 1% APY is grabbing consumers' attention. Since introducing the product, more than 1,700 S3 accounts have been open, totaling about $30 million. Gilfedder said the goal is to double that by the end of the year.
McGraw-Hill is promoting itself through the "We Hear You" campaign that focuses on consumer pain with traditional banking institutions, and S3 is also being spread through social media, ads on the CU's webpage and word of mouth.
But Gilfedder added that making sure members are engaged with the CU is just as important as growing the number of members with the account, and special emphasis is being placed on bill payment and the CU's full suite of mobile offerings.
"It's our opportunity to educate them on what financial wellness is and how innovative we are with our banking technology."