Building communities through cards

At KCT Credit Union in Elgin, Ill., cards don’t just generate income and provide a valuable member service. They build communities.

The $387 million asset credit union uses interchange revenue from its card programs to fund educational endeavors, says Mike Lee, president/CEO at KCT, which stands for Kane County Teachers.

“A big part of our strategic plan is supporting our school districts,” Lee says. “The funds from our cards typically go to the school districts’ educational foundations for scholarships and programs the district doesn’t have money for.”

That includes school supplies that many teachers pay for out of their own pockets, he says.

Such efforts are at risk, however, due to proposed legislation, the Credit Card Competition Act of 2023. Known as Durbin 2.0, the legislation would not only reduce credit unions’ interchange income, it would threaten consumer data security, privacy, and access to credit—and credit unions’ ability to support their communities.

KCT supports its members and communities with four card programs:

1. Affinity debit and credit cards, customized with school districts’ mascots and logos. The credit union contributes 20% of debit card interchange income and 25% of credit card interchange income to the schools.

“The cards also serve as marketing tools for the school district, and bring awareness of their foundations,” Lee says. “We also have no fees on our checking account and no minimum balances.”

2. Purchase card. KCT developed a card the school district uses for its purchases, and gives back a percentage of the interchange income it generates.

“The only income we receive from this card is interchange,” Lee says. “It doesn’t extend credit to the organization; they have to pay the entire balance each month. This card offers all of the administrative tools and applications needed to serve the school district, and we pay for the cost of this technology.”

3. Health savings account (HAS) card. Like the other cards, the HSA card has no fees. The only revenue comes from interchange and deposit dividends.

4. Secured credit card. KCT promotes its secured credit card as a way members can build credit and improve their credit scores. Members must pay off the balance each month.

While most financial institutions charge application, maintenance, and other fees for these cards, KCT offers them for free.

“Again, the interchange is the only income receive for these,” Lee says.

KCT donated more than $240,000 in 2022 to the community through interchange income earned on these cards, including $90,000 for the purchase card alone.

We’re all about financial empowerment and wellness, so we do all we can to keep our members out of credit card debt,” Lee says. “Our motto is building stronger communities together, and that’s what these cards do.

“Credit union philosophy is easy to talk about, but not an easy thing to do," he adds. "Cards are a tangible way to do this. Every day, I get to show the community our philosophy in action. I would hate to lose that because it’s become such a big part of who we are in the community.”

Listen: Interchange income at risk