MARION, Ind.-For many parents, the only thing scarier than putting the car keys in a teenager's hand is putting a credit card in those same hands. Afena FCU here is determined to change that-and throw in an incentive for local schools — with its student credit card program.
After a test run in Q4 2010, Afena FCU has rolled out a full program that offers qualifying students a Visa card with a credit line ranging from $100 to $500. All interest income goes back to local schools.
The project is the result of Afena CFO's Janet Shaffer's participation in the Indiana league's "ignite" program-which is a state-level initiative aimed at fostering product and service development on a low budget-where such a program was discussed.
According to Shaffer, students seeking to take part must first get their parents' permission and then go through the NEFE financial literacy program, which includes a unit specifically devoted to credit cards.
"It wasn't initially well-received, and we got a lot of 'Whoa, wait a minute!' when we started," explained Shaffer, adding that the 7,300-member, $53-million CU did extensive compliance research before launching the program. That research included determining who could apply, how to apply, what qualifications were necessary, and how the credit union would handle back-office administration.
Rollout has been slow, and Shaffer said that currently only two students have the card and both pay their balance in full each month, so Afena has not yet donated any money to local schools. But another three students are going through the education process and are expected to be issued cards soon.
"The students have to go through the education piece before they can apply," said Shaffer. "We won't even consider them if they don't go through the education program."
In order to get the card, students must be between the ages of 16 and 18 and be able to document that they can pay for the card. Credit limits are at loan officers' discretion. The card has 13.9% APR, and no annual fee or minimum balance. "It's the same as our normal Visa program for any adult," she said.
The CFO noted that the new card is not designed to be a profit-maker for the credit union, but rather an education piece. "We want these students to become responsible adults, as far as credit goes," said Shaffer, noting some research has shown consumers will retain loyalty to the first card they are issued.
Since the curriculum was developed through ignite, other Indiana credit unions can adopt the program if they wish. Shaffer said that credit unions in Lafayette and Indianapolis are considering launching similar programs of their own.
"The thought behind it was that if we can educate students when they're young, they'll become better members," said Shaffer. "If we can get them to understand the responsibility and how to use it properly, then later on in life they'll be better members. When they want to borrow money from the credit union, they'll be better borrowers and they'll be better savers."
