Credit Union Finds Success With Affinity Debit Card, And Has Become a Hero to Real Life Heroes Locally

RALEIGH, N.C. – A $514 million North Carolina credit union has become a hero to North Carolina heroes through an unusual card program. In an innovative affinity debit card program, members of the North Carolina Local Government FCU who are also members of the North Carolina State Firemen’s Association are able to designate 50% of the interchange generated by their credit union issued debit cards to the Association. The NCSFA uses the funds to conduct training and help local fire services in North Carolina purchase needed equipment. The credit union reported that in the 18 months the program has been established, the 1,128 enrolled firefighters and their family members have generated almost $18,000 for the association, $6,000 in the first quarter of 2004 alone. So called affinity programs, in which a card issuer will designate a special card for an association, alumni group, or non-profit organization, have long been popular among credit card companies. Credit card holders who use affinity cards are expected to be more highly motivated to use their card, to choose their affinity card over other cards and to be less inclined to switch from their affinity card to other cards which might offer a lower rate. But the benefits of an affinity debit card are less obvious. People generally don’t have more than one debit card so there is no real competition to win among debit cards in a wallet. In addition, the generally low value sales that characterize debit transactions make them less attractive vehicles for fund raising. “I think that may be part of the reason people have been discussing affinity debit cards in theory for a while, but we may be the first CU in the country to actually offer one,” said Michael Spink, marketing editor for the credit union. But Maurice Smith, CEO of the credit union, said Local Government had found the affinity debit program had brought some definite benefits that might be harder to quantify but remain nonetheless real. For example, although he couldn’t quantify the exact number, Smith is confident that the program has bought the credit union more members as firefighters have opted to get and use a card which supports their efforts. “Because a debit card is generally attached to a checking account and a checking account is the sign that the credit union has become the member’s primary financial institution we are sure we have gained new members from this program,” Smith said. He also noted that even though there might not be any competition among debit cards in a wallet, the affinity program has also played a role in increasing debit card usage among card members who hold the card. “Frankly, our biggest issue is education,” Smith said. “We have a lot of members who are familiar with affinity cards as a credit card concept and the notion that the association will benefit from a portion of the finance charges, but nobody understood the concept of interchange or merchant transaction fees.” The upside is that once firefighters understood that the affinity card was a debit card and not a credit card, Smith explained, it became more popular, particularly among young firefighters who were just starting out and didn’t want to take on additional debt. But Smith added that the program had a special place in the heart of many of the credit union staff because it was more than interchange and cross selling and new members. “I believe, and I know others do too, that someday in the future a firefighter is going to go home to his family because of some training or some equipment that he was able to have because of this program,” Smith said. -