Why One Credit Union Is Lowering Card APR

Michael Bartlett
May 14, 2008 | COMMENTS

With tax, home improvement, and vacation seasons coming soon, Pacific Service Credit Union is taking advantage of the Fed's recent interest rate lowering campaign by offering its members a 5.99% interest rate on Visa cards.

The promotion began February 28, and the lower rate applied to all balance transfers and purchases posted by March 31.

Noelle Fischer-Herbert , vice president of corporate development, said Pacific Service is in the process of mailing Visa checks to all of its card holders. She said members can use the checks to pay bills or other credit cards. The checks must be in the amount of $50 or more.

In addition to the direct mail component, Pacific Service is getting word to its members via its website and its in-branch televisions. The flat-screen TVs run a combination of news, sports, weather, trivia and promotions. The rate-cut promotion is a new step for the credit union.

“We have not done a rate-lowering in this fashion; we have periodically just flat-out lowered the rate,” Fischer-Herbert told the Credit Union Journal. “We are trying to take advantage of the fact people have high-rate cards from other sources and can bring it here. Or, perhaps they have a big purchase coming up or need to pay an income tax bill.”

The 5.99% rate will remain in effect through the end of September. According to Fischer-Herbert, March to September is a period during which members tend to post larger-ticket charges to their credit cards–including items such as taxes, school payments, vacations, and home improvement projects.

The 5.99% rate is “pretty attractive,” she said, and is “just above our cost is a lower-rate environment.

“Generally, we have not done draft promotions at an artificially low rate,” she continued. “They tend to be popular for our members, as they like to have a check to write against their credit line. We are only sending three checks. It will be interesting to see the reaction. The checks provide another contact point for service.”

The promotion is called “Tidy up Your Finances.” The background on the checks carries on the spring-cleaning theme with a sheet drying on an old-fashioned clothesline, held by two clothespins.

“The rate is really good for a balance roller, who normally has to pay 12% to 15%,” Fischer-Herbert observed. “Our platinum rewards Visa rate is 10.9%, which is pretty good, and our classic/starter rate for lower credit scores or first-time cardholders is 14.5%.”

This article appeared at www.cujournal.com and is reprinted with permission.