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Credit unions typically are known for lowering costs to their members, so why is one credit union trying to encourage its members to pay more than they have to? Because it's in their best interest, when it comes to making credit card payments.

Local Government FCU officials agree with the new law that requires non-credit union credit card portfolios to increase monthly minimums so much that they have created a similar options for their members.

"The low minimum is really not friendly to the consumer,'' Maurice Smith, CEO of LGFCU told The CU Journal. "It extends the debt beyond a reasonable period of time.''

In March, the $600-million CU began giving its credit card holders the option of paying monthly minimums in the range of 3% to 6% with the option of making changes at any given time.

"This goes beyond the federal legislation upping minimums around 4% and gives members the ability to choose what works for them,'' Smith said. While the program is still too new to determine its impact, Smith did say that CU statistics show that 42% of LGFCU's members pay only the monthly minimum required on their cards. Another 15% pay their debts in full, while the remainder-43%-pay more than the minimum.

"I don't know if it's just part of human behavior that people are willing to pay what they see on that statement,'' Smith said. "I do think that a lot of people pay the minimum with the intention that they will pay more later. Unfortunately, life happens and other things come up.''

Since The Credit Union Journal first reported about LGFCU's plan a few months ago, Smith said, several other CU officials have called to inquire about it.

"Personally, I have not seen any other CU do this, but we have had some calls from other CUs asking about why and how we were doing it.'' Smith said it makes sense from the corporate angle to keep the minimums as low as possible, but the higher minimums are more in line with the CU philosophy of helping the members make the most of their money.

"Consumers often have no guidance on how financial matters affect them and how small changes can have a big influence,'' Smith said. "We work to offer our members tools they can use to help them accomplish their financial goals-and getting out of debt is a pretty common goal.'' (c) 2006 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com http://www.sourcemedia.com

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