Interest Buy Downs Take Flight At Wings Financial

The Twin Cities cooperative is giving card users the option to reduce auto loan interest rates as a points redemption.

Top-Level Takeaways

  • Wings Financial offers a 0.50% rate deduction on vehicle loans as a credit card rewards option.
  • What began as a pilot program is now a permanent fixture in the enterprise’s rewards program.
  • Losing some income while gaining some stickiness is the long-term objective, and members agree, at the rate of one every three days.

Wings Financial Credit Union ($7.3B, Apple Valley, MN) received inspiration from a hometown retail giant to ramp up its rewards game.

The Twin Cities cooperative is offering members the ability to use their points to lower their rate on Wings Financial auto loans by 50 basis points. The credit union launched the program in May as a two-month pilot and decided to continue it because of positive response.

Mike Sahr, Vice President of Payment Systems, Wings Financial Credit Union

“Target is headquartered here, and we were impressed with the loyalty to their Red Card,” says Mike Sahr, vice president of payment systems at Wings Financial for the past six years.” Target rewards shoppers with a generous sales discount when the Red Card is used. They’re cutting into their own sales margins to generate loyalty. It’s a unique reward that only Target can offer. We brainstormed internally on how we can do something similar and came up with the loan interest buy down option.”

Rewarding Members With A Value Add

Sahr says credit union strategists figure the long-term gains justify cutting into margins, especially when it rewards loyalty for using the cooperative’s products and services. It’s a great way to bring additional value to being a member.

“We want to reward those members who are most engaged in the cooperative,”Sahr says. “If a member is using Wings products and services to earn reward points, we want the reward to be meaningful and valuable. The more value our members see in membership, the more loyal they will be to Wings.”

Forty-two members with auto loans totaling approximately $787,000 had taken advantage of the offer by late August, using 1.1 million reward points to save $9,000 in interest.

“It will never be a high-volume redemption option,” Sahr says. “But we’ve had about one member do the redemption every three days since we launched.”

This landing page shows members how they can save on interest rates and more through their Wings Financial’s cards rewards program.

Raising Engagement By Lowering Interest Rates: An Enterprise Reward

The credit union offers the interest buy down via its staff lenders and its Wings Member Rewards landing page. Wings also offers an annual opportunity to earn points on auto loans. Members can get 10,000 points for every $10,000 they refinance by bringing over a loan from another lender.

Member Rewards is an enterprise program at Wings Financial, Sahr says, so points earned remain with members until redeemed even if they close that card account. As long as they stay a member.

Members also can choose airline tickets, travel services, merchandise, and digital gift cards through a third party, and Sahr says the credit union is looking at adding some additional redemption options next year.

“The revenue, the interest income we’re forfeiting, is well worth the reward back to the member.”

Also under consideration is adding other ways to earn points beyond using debit and credit cards. Possibilities include signing up for and using Wings digital services, Sahr says.

An investment in rewards is an investment in member engagement, the payments executive says.

“We feel like the revenue, the interest income we’re forfeiting, is well worth the reward back to the member,”Sahr says. “We don’t have all the results yet for this one program, but we do know the more our members participate in our programs and with the cooperative, the longer they stay with us and stay engaged.

“We’re banking on it.”

February 10, 2022

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