As Consumers Rebel, Credit Unions Can Benefit

Negative headlines about financial institutions are commonplace in our current national climate, but one issue in particular has risen above the din in the last few months.

Negative headlines about financial institutions are commonplace in our current national climate, but one issue in particular has risen above the din in the last few months. Many banks have appeared in the news recently as they scramble to enact changes before the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act goes into effect on August 20, 2009;

Credit Card Issuers Raising Rates Ahead of New Law The Washington Post, 7/2/2009

Sample Article Comment:

I, like many, received a letter from Chase last week saying that my rate was going from 9% to 12% even though I have never been late with a payment and have a good credit score. When I called Chase and asked if it was in response to the recently passed legislation the rep said No, all the companies are doing it. What a ridiculous response! But what did I expect?

I went promptly to my credit union and opened an account with them. I’d rather make my interest payments to them than to Chase who is apparently in the business of taking complete advantage of its card holders all in the name of higher profits for its executives. The government needs to act, now.

Consumers Hit Again as Some Banks Raise Credit Rates, Fees USA Today, 7/1/2009

Sample Article Comment:

I just got a credit card statement in the mail today from Bank of America. Guess what? The rate has gone from 7% to 11.74%! What is staggering to me is that I have had this card since 1996 and have probably run close to $200,000 through this line of credit and have NEVER paid a late bill or late fee. I’ll cool off a little before calling. It’s amazing how a good customer has to pay for the sins of those who don’t pay their bills.

BofA to Boost Rates on Cards with Balances The Wall Street Journal, 4/9/2009

Sample Article Comment:

My Chase card was closed a few months ago because I didn’t use it enough. On Saturday, I also received a similar letter as the BOA one, but from GMAC Bank raising the rate on my account, which I’ve had since 1995, from 7.9% to 23.65%.

Now I’m debating on just closing it–which with the Chase card closing will definitely lower my credit rating, or leaving it open as I have this subscription and a couple others billing to it once a year.

I encourage you to read more of the public comments that have been posted in response to these articles. Consumers that have never missed a payment or exhibited any type of ‘risky’ behavior are being notified about reduced creditlimits, higher overall rates and fees, restructured rewards programs, and dramatically higher rates on existing balances. I would wager that someone you know has received one of these notifications in the past few weeks. Many of these consumers viewthese actions as undeserved penalties and are understandably upset.

An Opportunity for Credit Unions

Since credit unions were largely uninvolved with the practices that lead to the creation of the CARD Act,they are strongly positioned to benefit from the current environment as disaffected bank customers look to establish credit with financial institutions they can trust. Many credit unions are capitalizing on the recent public interest in credit cardpractices to promote their transparent and reasonable card offerings. How is your credit union planning on taking advantage of this opportunity?

How a Credit Union is taking Advantage of this Opportunity

APL Federal Credit Union ($278M), located in Laurel, MD recently decided that market conditions are ideal to promote their basic low interest rate credit card, which also sports consumer-friendly features such as:

  • No transfer fee
  • No annual fee
  • 25-day grace period on all purchases
  • No cash advance fee.

They began promoting the offering at the end of June with a targeted direct mailing, ads in the local newspaper, and by featuring the card prominently on the front of their website. The website card promotion was coupled with a special section of thewebsite titled ‘All Cards are Not Created Equal‘ which clearly explains the implications ofthe Card Act for all consumers and specifically APL card holders. Local consumers are strongly responding to their efforts, and APL is experiencing fantastic product growth, attracting new members, and deepening existing member relationships.

April 19, 2016

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