GLENDALE, Calif.-Efforts by big-box retailers to avoid interchange fees will further eat into CU debit revenue this year, asserts one person, and potentially create a position between a "rock and a hard place."
Stuart Perlitsh, CEO of the $300-million Glendale Area Schools FCU, pointed to Target's debit card push, where the retailer is giving a 5% discount on Target purchases for consumers who use its store debit card. Perlitsh said Target can afford to make the offer since it is posting the debit transactions as ACH items.
"These retail merchants have done an end-run around interchange fees," said Perlitsch who believes more retailers will follow. "Now with merchants like Walmart, Arco, and Target issuing their own proprietary 'check-like' cards, they have reduced the interchange fee to them and the interchange income to the credit union by 100%."
Perlitsh urged credit unions to monitor their debit interchange closely and reduce their operating expenses to offset the reduction of interchange income. "Several credit unions are profitable today because of fee income. That will soon change. We have entered the new normal-providing both ACH and plastic card services without interchange income."
That puts revenue-starved credit unions between a "rock and a hard place," insisted Perlitsh. "After witnessing BofA's consumer slap-down, I wonder how many credit unions are now going to impose a debit card fee?"
