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Article

Why Do Credit Union Members Leave for Banks?

Written by

Picture of Sébastien Forget

Sébastien Forget

Published on February 17, 2025

Home / Articles / Why Do Credit Union Members Leave for Banks?

6 minutes reading time
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At a glance:

  • Lack of Technological Advancements​
  • Limited Accessibility and Convenience ​
  • Perceived Product and Service Offerings
  • Financial Education and Guidance
  • Brand Perception and Awareness
  • Member Service
  • Member Feedback
  • Competitive Rates and Fees

Learn why members leave credit unions for banks and reverse the trend today. Optimize your credit union strategy for member engagement.​

Credit Union Customers

As a credit union, you work hard on your member-focused approach, community-oriented values, and personalized service. However, in recent years, a concerning trend has emerged – An increasing number of credit union members are opting to switch to traditional banks, affecting credit union growth.  

But why? And what can you do about it? 

Let’s explore the reasons behind the shift so you can implement strategies that deal with these issues head-on, empowering your institution to retain its existing members (and attract new ones!).

Lack of Technological Advancements

THE ISSUE

Some members choose to leave credit unions for banks because they perceive that traditional banks offer more advanced technology and digital banking solutions. Especially if your credit union is smaller, you may struggle to keep up with today’s rapid pace of technological innovation.

THE SOLUTION

Aim to prioritize investment in modern digital infrastructure. By doing so, you’ll be ready to offer your members an exceptional online and mobile banking experience – from user-friendly mobile apps, online banking platforms, and features like mobile check deposits and person-to-person payments.

Investing in technology is no longer a ‘nice to have’—it has become a necessity to stay competitive and deliver top-notch products and services to members. This is especially critical when striving to attract a younger demographic. 

Limited Accessibility and Convenience

THE ISSUE

Some credit unions may have a limited number of branches or ATMs compared to large banks. If this is the case for your institution, you can make interacting with your credit union less convenient for members, especially those who travel frequently or move to new locations.

THE SOLUTION

Tackle this by expanding your branch and ATM networks. You can also collaborate with shared branching networks, granting your members convenient access to their accounts across various locations. 

Offer free ATM usage and rebates of other ATM fees. This allows the member to withdraw from their account anywhere in the country without having to search for an in-network ATM or pay a fee. This is a great offer to help overcome the convenience and lack of branch network issues. It may also be less expensive and easier to implement than joining other branch networks (e.g., ATM SUM network and Allpoint Network).  

Perceived Product and Service Offerings

THE ISSUE

Some people opt for banks over credit unions due to a perception that banks offer a broader range of financial products and services. Your credit union may provide excellent loan rates and savings accounts, but some potential members may be completely unaware of these benefits. When consumers shop for loans or deposit rates, offers from banks and Fintechs are often the most prominent, thanks to their larger marketing budgets and greater resources. 

THE SOLUTION

Enhance your marketing efforts to effectively communicate the full spectrum of services you offer. From mortgage options and investment products to business finance solutions, flaunt what you’ve got to your future members! Build member relationships! Train employees to look for opportunities and to present them to existing members. Be proactive, not reactive. 

Cross-sell efforts (next-best-product recommendations). Based on a member’s existing relationship with the CU, offer additional products and services when appropriate. Being proactive and making offers/recommendations to help the member save time, save money, and/or make more money, will promote retention. 

Save time – digital/mobile banking, remote deposit capture, night drop, etc.
Save money – refinance options.
Make money – deposit specials.

Financial Education and Guidance

THE ISSUE

As banks are often associated with vast financial resources and a wide range of financial advisors, some individuals believe that they’ll receive more comprehensive guidance at a bank. 

THE SOLUTION

Your credit union can counter this belief by investing in robust financial education programs. Empower your members with the knowledge and tools to make informed financial decisions by providing workshops, seminars, and online resources on topics like budgeting, saving, and investing. When your members are informed, their decision–making skills and confidence increases.

Brand Perception and Awareness

THE ISSUE

Branding and public perception of credit unions also play a role in member retention. Potential members may have misconceptions about credit unions or simply lack awareness. 

THE SOLUTION

You can focus on building a strong brand identity for your institution. Emphasize your community-driven values and member-centric approach. You can engage in local community initiatives and social outreach to help increase brand visibility and foster a positive reputation for your credit union. 

Member Service

THE ISSUE

Staffing shortages and turnover lead to poor service experiences and an increase in member dissatisfaction. 

THE SOLUTION

Invest in employee training and development and offer more competitive salaries and benefits to promote employee retention. Make sure staffing levels are sufficient, and employees are scheduled appropriately to meet member demands, particularly during peak hours. 

Members become dissatisfied when there are constantly new employees, and even with excellent bankers, there is a learning curve and the lack of knowledge and understanding of the CU/members can lead to poor member satisfaction.

Onboarding is a very effective way to make a new member feel welcome and to ensure the member remains with the CU. A planned onboarding program will also help build member relationships, with increased engagement.   

Member Feedback

THE ISSUE

Credit Unions risk losing members to competitors due to unaddressed pain points and dissatisfaction. Without a structured approach to collecting and managing member feedback, issues go unnoticed, making it impossible to implement improvements.

THE SOLUTION

 Regularly survey members to identify pain points and areas for improvement, ensuring that services align with member needs and expectations. It is much better to seek out dissatisfied members and to find areas of improvement, so the Credit Union has a chance to resolve any issues and improve member satisfaction. Without an avenue for accepting member feedback and managing it (providing responses, coordinating resolution of member issues, continuous improvement), members will continue to leave for other Financial Institutions, and the Credit Union will not even have a chance to “save” the relationship.  

Competitive Rates and Fees

THE ISSUE

Members may perceive a difference in interest rates, fees, or service charges and leave a credit union for a bank. 

THE SOLUTION

Regularly review and adjust your pricing structure to remain competitive in the market while also ensuring you can sustainably support your operations and provide stellar member service. Communicating transparently about fee structures and membership benefits can also help eliminate any misconceptions. 

Marketing – make your members aware of your rates/low fees. This category is a competitive advantage of a CU vs. bank. CUs typically offer higher deposit rates, lower loan rates, and have lower/no fees compared to banks. Make sure members know this! This is another example of lack of awareness and perception, and also Financial Education and Guidance. Being proactive and letting members know how the Credit Union can help MAKE them money, SAVE them money, and/or SAVE them time, can help solve this issue. 

Conclusion

Credit Union Growth Strategy

You have the power to reshape the trend of credit union members migrating to banks – and it starts with taking proactive steps. By directly tackling the driving forces pushing members away and embracing modern technology, expanding your reach, enhancing educational programs, and building strong brand awareness, your institution can reclaim its competitive edge and reaffirm its position as a trusted financial partner in your community. By prioritizing member needs and delivering exceptional service, your credit union can build lasting connections and draw a steady influx of new members.

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