RALEIGH, N.C.-As the latest wave of bank debit and checking fees were making news, Coastal FCU was getting a lot of media attention for paying members higher checking interest for using their debit card more.
Timed to launch Oct. 1, when the new Durbin rules took effect, Coastal raised its yield on its Go Green Checking product to 2.51% APY when members complete 30 debit transactions each month. Previously, the credit union paid 2% for 12 monthly debit swipes. Members who use their debit card 12 times a month now receive 1.01%. Those who do not complete 12 transactions are paid .10%. The higher interest payments are made on balances up to $50,000, and additional funds receive .10%.
CEO Larry Wilson said the timing has been accidental but beneficial. "Bank of America's timing was a surprise. We were able to capitalize on their media attention and turned the focus toward the positive story we have to tell. We had the three major television networks here place a small story on their websites and mention on air that we are paying a higher checking dividend."
The change by Coastal had been planned for a while and was initiated to reward members who are using their debit card heavily while spurring additional activity among moderate card users, said Wilson.
"This is a growth opportunity, especially among younger members," noted the CEO, who expects the higher interest payment will be offset by the additional debit swipes. "We did a lot of research and we believe this change will only accelerate our members' behavior. Our members average 24 debit transactions per month and some are as high as 50. We feel 30 is very doable-that's one a day."
The $2-billion Coastal issued a press release saying it will not add a debit fee as long as interchange revenue remains at current levels. However, Wilson expressed concern about the two-tiered system holding up, and merchants adding a purchase minimum due to Visa and MasterCard's recent move to increase what they charge merchants on small-ticket buys. "I hope merchants don't kill the goose that laid the golden egg."
Increasing Rewards
The same holds true at the $4.5-billion Randolph-Brooks FCU in Live Oak, Texas, which has increased its cash-back debit rewards to 15 cents from 10 cents per transaction through the end of the year. Sonya McDonald, SVP, planning and market development, said the promotion is in line with the CU's philosophy of giving members exceptional value. "Last year our debit rewards returned $5 million in cash back and we will beat that total this year."
The moves by both credit unions come as Bank of America, Citigroup, and other big institutions required to cut their debit fees under the Durbin Amendment are moving toward monthly and annual fees for debit cards and higher checking charges. Credit unions like Coastal and RBFCU that are under $10 billion in assets are not affected by the new debit card fee caps.
