Some 80 credit unions will soon offer American Express Co. cards in addition to VISA and MasterCard, according to MBNA, which is getting CUs to sign up for the program by offering to share revenue at no cost to the CU.
Hal Erskine, senior vice president at MBNA Corp., said 15 credit union "partners" are already offering the American Express card. "We plan to have 30 by the end of March and all 80 of our partners by June," he added.
Erskine said that revenue potential for credit unions from entering into a "revenue arrangement" with an American Express cards is "competitive" compared with Visa USA Inc. and MasterCard International Inc.
"It's no cost and a great revenue source," Erskine said. Credit unions won't incur any administration cost as "we do everything from getting the application," he said.
While interest rates will also be similar compared with other cards, Erskine, as well as other credit union executives interviewed said the main objective is to give members one new option.
A U.S. Supreme Court ruling on Oct. 4 paved the way for credit unions to offer American Express cards after scrapping exclusivity clauses MC and Visa required from issuers. The antitrust case was brought by the U.S. Justice Department.
Lynn Jones, chief support officer at Knoxville TVA Employees Credit Union in Tennessee, said offering the card may bring business. "We have members who presently have American Express cards and they are doing business somewhere else, so the more we do for them, the more likely they are to come to us for all their financial needs," she said. Knoxville TVA plans to roll out its program this month.
"MBNA actually owns the credit card portfolio. We just offer the card, get the applications filled out and the application is then forwarded to MBNA," Jones added.
She said that if a member already has an American Express card, they may opt to "pay their older card through a new card with us" or keep both.
Rick Thornburg, SVP-Lending at Eli Lilly FCU from Indiana, said MBNA considered that the CUs demographics fit American Express' targets. The Indianapolis-based union has some $628 million in assets and more than 30,000 members. "I don't know if it is going to be a dramatic impact (on lending)... but it is not going to cost us. It (American Express) probably brings a higher level of brand," Thornburg said. "We have members that would qualify for $100,000 (credit limits)."
Erskine said that credit limits may be similar to those from Visa and MasterCard and the caps may in some cases be as high as $250,000. They will vary according to each individual.
Besides the advantage of having more choices between credit cards, credit union members picking the American Express will find in the card different sets of rewards like "double points for travel" and a good worldwide service network, he said.
MBNA, which claims to be the largest issuer of credit cards to credit unions, started issuing American Express cards just after the Supreme Court ruling.
MBNA has a pledge that it won't use credit union lists to cross-sell MBNA products to members.
