News & Events

UI Credit Union May Gain Customers After Big Bank Switch

The University of Iowa Community Credit Union might see an uptick in customers as big-bank patrons try to avoid additional swipe charges, some experts said.

This follows Bank of America announcing on Sept. 29 that its customers will pay a monthly $5 debit swipe fee, effective January 2012. And other big banks are following suit with announcements of similar fees.

However, not all customers may be willing to shell out the additional sums, some experts said.

"If it becomes a lot more expensive to use debit cards, some people will go back to using checks or cash…" said John Solow, a University of Iowa associate professor of economics. "Banks that do impose those charges may find themselves losing customers and losing revenue."

Rep. Mary Mascher, D-Iowa City, said customers leaving big banks might choose to take their business to local ones.

"A lot of people are walking to smaller banks," Mascher said.

Jim Kelly, a credit union senior vice president of marketing, said the establishment has seen significant growth compared with the national credit union averages—with a growth in membership of 14.3 percent, compared with the 0.55 percent national average. The credit union does not charge a swipe fee, and officials have no plans to do so.

"We price our products aggressively, pay dividends on checking accounts, and don't charge a debit card swipe fee," he said.

Kelly said the credit union will spend more money on upcoming advertising campaigns to attract potential customers to the benefits the credit union offers.

"As for a marketing strategy, we are stepping up our advertising of our free checking products," Kelly said. "We're spending more money on television, print, direct mail, etc."

Solow said potential credit-union customers may consider the benefits of joining a large bank.

"There are other advantages to being with a big bank," he said. "One of the advantages is that it has offices in a large part of the country. If you travel a lot, there's an advantage to having an account at Wells Fargo. If your bank is Hills Bank or a credit union, you can still get access—but it's a little harder."

However, Jeff Disterhoft, the president of the credit union, said he doesn't anticipate more customers specifically in response to other banks' swipe charges.

"I don't know that we're expecting a great deal of increase in this market, because the bigger banks announcing the additional charges don't have a big presence in Johnson County specifically," he said.

However, UI finance Professor David Bates said Iowa City, specifically, may not be affected.

"We don't have any large banks. It won't affect Iowa City," he said. "… Nationwide, we don't know what kind of effects there will be."

But Solow noted that a hypothetical increase in credit-union customers would cause credit unions to become slightly bigger businesses.

"The primary way that banks make money is that they take money in at low interest rates and loan the money out in slightly higher rates," he said. "The more money they have to make that spread, the more they would make."


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