MADISON, Wis. (7/11/14)--Credit unions are finding success in offering debit reward programs to their members--three years after big banks bailed on the programs in the wake of interchange rule changes.
While most big banks jumped ship, community financial institutions--including credit unions--saw an opportunity: Debit cards account for nearly 50% more noncash transactions than credit cards. And consumers are more than happy to earn cash for spending money (CreditCards.com July 9).
About one-third of financial institutions offer rewards tied to debit cards, according to Aite Group research.
Credit unions say the programs fit with their members-first philosophy, according to Ron Shevlin, Aite Group senior analyst. Most community financial institutions are using debit as a channel for growth, according to Shevlin. Among those with a debit card rewards program in place, 60% said the program helped drive usage.
At $1 billion-asset Hanscom FCU, based on Hanscom Air Force Base, Mass., the MemberPoints reward program has been popular with members since 2007, according to Steve Silva, the credit union's vice president of marketing.
Members earn one point for every $2 when they sign a receipt, or five points per transaction when they use a PIN. The program makes the credit union's checking product more appealing, Silva told CreditCards.com. Points are used to make purchases from a merchandise catalog.
Studies show that consumers prefer using debit cards to credit cards. About 49% of those polled said they preferred to pay by debit, while 34% said they preferred credit. Another 11% said they preferred paying by cash or check, according to a 2013 Consumer Payment Choice Study by the payments processing company TSYS.
At Directions CU, Sylvania, Ohio, with $598 million in assets, debit rewards are an added benefit for members with checking accounts but not necessarily a driver on their own, Julie Linch, senior vice president of retail delivery, told CreditCards.com. Consumers still expect other benefits, such as free checking, Linch said.
Bankrate's 2014 Credit Union Checking Survey found that 72% of the nation's 50 largest credit unions offer a free checking account, which means there are no monthly service fees or point-of-sale transaction fees associated with the account (News Now March 4).