TEMPE, Ariz. -
In 2006 the average holiday shopper was expected to shell out $800, up $62 over the year before, according to the National Retail Federation-and most of that debt went on credit cards, making for a worrisome debt-load when the new year credit card bill arrived.
Altier Credit Union here did an independent survey that found that 54% of shoppers planned to use plastic and faced months of high-interest payments. ACU's research found that 48% of individuals agreed that purchasing holiday presents created a financial burden, so they crafted a "one-rate" short-term holiday loan that disregarded their credit scores.
"We did this to specifically help our members alleviate some pressure during a very stressful season filled with traveling, crowded malls and parking lots," said Altier's CEO, Rita Albertson.
The offering launched in November 2006 and continued through January. The loan rate was 7.00% APR, which includes a .25% discount for ACH, otherwise 7.25%. It was a 12-month short-term loan with a maximum $1,000 amount. Altier funded 139 Holiday loans totaling $296,000 for an average $2,129, recording a 1.5% response rate from members. Based on the product profitability, ACU's break-even balance requirement was $1,307.
Altier CU, founded in 1947, (formerly known as SRP Credit Union), has assets of $189.6 million, its 29,000 members served by 80 employees. The CU's survey queried some 205 qualified respondents, not necessarily Altier members, but members of CUs.
Results showed that 56% of the loans came from the Phoenix area, totaling $158,000, with an average loan balance of $2,257; 27% came from Page, totaling $64,000 with an average loan balance of $1,882. There were five new member accounts opened with a Holiday Loan, totaling $19,100 with an average loan balance of $3,820 (3 out of 5 came from Maricopa County FOM). The average balance is 69% higher than existing members, the CU noted.
In the survey, almost 50% of individuals reported that they prefer receiving gift cards rather than individuals presents, and 44% percent claimed to purchase gift cards as gifts whenever possible.
With that in mind, the CU launched the Visa Prepaid Altier Credit Union VISA Gift Card Program. Altier claims to be one of the few financial institutions in the valley to offer a VISA Prepaid gift card product. It was offered to members for only a $3.00 fee whereas the average price per prepaid card is $8.00. "This was a pass-thru fee from our processor, not a fee-income generator for the CU," said Albertson.
"We felt strongly about these cards being an additional benefit to our members and not a fee-income generator," said Albertson. "This is one more means to reiterate our personal financial commitment to each valued member while saying thank you for their continued business."
The VISA Gift Card had a $1,000 prepaid limit and could be used anywhere VISA is accepted to access the prepaid amount from an ATM machine for cash. The added benefit in reducing the chances of identity theft while shopping online added to the convenience. Altier started its VISA Gift Card Program in September 2006 and at January's end had sold a total of 605 cards totaling $60,000 with an average pre-paid load balance of $100 per card.
Altier's research found that over 50% of people declared that they always spend more than they plan to on holiday presents, with one-third reporting worry over having enough money for holiday shopping. Even more agreed that the financial burden of holiday shopping is stressful.
The CU markets this "Holiday Loan" every year to help members through the season, said Albertson. "It's very popular and we see it more from a member services perspective-meaning, there's not much profit from making these loans to our members but simply a loan channel for them to continue to utilize the credit union for all their financial needs."
