Give Credit to Debit

Debit cards build loyalty, convenience, and income.

What do members want from debit cards? Convenience, security, and peace of mind, says Crystal Long, senior vice president of consumer lending and remote services for $1 billion asset GECU of El Paso (Texas).

"Members want the convenience of quick checkout and easy access to their money," agrees Nanette Stracener, assistant vice president of marketing for $152 million asset Southwest Airlines Federal Credit Union in Dallas. "They don't want to carry a checkbook. Most credit unions offering debit cards receive income based on interchange fees."

Long, Stracener, and Jim Kelly, marketing director for $410 million asset University of Iowa Community Credit Union in Iowa City, share tips for operating a successful debit card program.

Q. How has your debit card program changed over the years?

Kelly: The benefits and features of our debit card program have stayed the same. We never charged a fee for the card, and we still don't.

Long: In 2001, GECU of El Paso began offering an instant-issue "MasterMoney" debit card at two of our branches. Prior to our instant-issue program, our card processor mailed all MasterMoney cards. A year later, we bundled the card with our checking accounts. Every member who qualifies for a checking account receives a debit card as well.

Q How important are debit cards to your CU?

Kelly: Very important. They're convenient for members and generate interchange income.

Long: Debit cards allow us to be more competitive. Our debit card program also offers members convenience and personalization.

Stracener: Our membership is spread from coast to coast. Our debit card gives members convenient access to their money regardless of where they are. The trend today is, "I want it now and I want it fast." It doesn't matter if members are local or from out of town.

Q What benefits do debit cards provide?

Stracener: Our debit card program helps solidify member relationships. We've always tried to offer products and services that are in high demand. Having debit cards helps us develop better relationships with members because they use more products and services.

Kelly: Debit cards make it easier to do transactions. Members don't have to order checks as often.

Long: Our debit card program results in increased profitability and member retention.

Q How popular are debit cards among your members?

Stracener: About half of our members use our debit card.

Kelly: Seventy-five percent of our checking accountholders use our debit card. The national average is about 62%, according to Raddon Financial Group [Oakbrook Terrace, Ill.]. The card is so convenient that members have grown to love it. If they lose their card, they want it back the next day. Our members prefer electronic methods.

Long: Almost 50% of our 240,000 members have a debit card.

Q How are users and nonusers different?

Kelly: Members who use the debit card use more automated services, such as online bill pay and Internet banking. Members who don't have a debit card tell us they don't trust themselves with the card or they fear fraudulent activity.

Stracener: Members who use our debit card have and use more of our products and services. When members use our debit card, it usually indicates that Southwest Airlines Federal is their primary financial institution.

Q What are some new debit card features?

Kelly: We're looking at instant-issue debit cards. This would allow us to issue a debit card the moment a member opens a checking account with us. Currently, it takes about a week to get a card. We'd like to bring the operation in-house so members can get the card on-site.

We've also considered a cash-back debit card program. This would allow members to get a bonus based on total purchases made with the card.

Long: In October 2002, our debit card began featuring a local artist's design. Our card now is easily identifiable with our community.

Q Have you noticed a shift to debit from checks and credit cards?

Long: The growth and success of our debit card program indicate the acceptance and popularity of debit cards continue to increase. We've seen a decline in the number of checks flowing through our processing center.

The change has affected our planning in the check processing area. We're considering outsourcing this operation.

Kelly: We've seen an upward trend with the use of debit cards [at the point of sale] and a downward trend of use at automated teller machines [ATMs]. The increased use of debit cards is because we continuously promote the benefits.

This makes us more efficient, helps our income, and reduces costs associated with check processing. We were the first to introduce debit cards in our community 11 years ago. We gained a lot of new members at that time.

Q What are the primary barriers to debit card use?

Kelly: Getting members to use the card the first time. People who want a debit card will get it and use it. People who don't understand how it works will use it as an ATM card. You have to educate these members about how to use it as a debit card. Once they start using it as a signature-based transaction, it really takes off.

Stracener: We educate members about the ATM side vs. the debit side of the card. The cash limit at the ATM usually is $200 a day, while the debit card carries a higher withdrawal limit.

Q How do you market debit cards?

Kelly: Anytime staff members see one of our old ATM cards, they cross-sell the debit card. We implemented an incentive program where staff members earn $5 for every ATM card they convert to a debit card.

We also offered a promotion to boost debit card use among members. With each point-of-sale debit transaction, a cardholder's name was entered into a drawing for a Caribbean cruise. We promoted the heck out of it, and we saw a 37% increase in use over three months. The promotion helped push existing cardholders to use the card more as a check.

Debit card use was sustained after the promotion. This told us the promotion was successful not only in getting members to use the card once, but it got them to continue using the card. It wasn't just a one-time spike in use.

Long: Employees are key to the success of this program. They emphasize the card's features and benefits. The card is free and has optional overdraft protection available from a line of credit and/or designated share account.

Q How do you educate members about debit cards?

Kelly: Education has to begin when they're with the account executive and opening that checking account. But follow-up is important as well.

We implemented a program known as 2-2-2. Two days after a member opens a checking account, we send a handwritten thank-you note with a business card. Two weeks later, we call to be sure they received the debit card in the mail and ask if they have any questions about using the card. Finally, two months after members open an account, we make sure they received their statement and that they understand how to read it.

Stracener: Initially, we mailed seven pieces within three months informing our members of the change from our ATM card to our ATM/debit card. We continue to educate members through our newsletters, Web site, and statement messages about how and where to use their debit cards.

Q How do you encourage members to use your card?

Long: Our instant-issue debit card program has been a huge success. Because we provide members with a debit card when they open a checking account, they can use the card immediately.

It's important to research the product and market potential extensively. You must know your target audience and bundle the debit card with other products.

For information about debit card trends and opportunities, visit CREDIT UNION magazine.com

Copyright Credit Union National Association, Inc. Jun 2005
Provided by ProQuest Information and Learning Company. All rights Reserved