How 1 CU Is Driving Greater Debit Interchange

By Ray Birch

EDWARDSVILLE, Ill.—One credit union is contending more can be earned in debit interchange if member incentives are tied to total monthly spend rather than total monthly swipes.

Feature Epic Checking low res

That’s why the $1.2-billion Scott Credit Union has introduced a new “Epic Checking” account  that pays a high 4.05% APY on balances up to $25,000 when cardholders spend more than $1,500 monthly.

Scott CU also offers a second tier, 3.05% for spend from $750 and $1,499.

Taking an e-statement is the only other requirement on the free account that also rebates up to $10 each month in foreign ATM fees. If requirements are not met, members receive .25% interest.

“We think this makes more sense, to tie our interchange income to spend,” said CEO Frank Padak, noting some members can be “gamers” with the swipe system by using, for example, their debit card to buy Snickers bars at gas stations to get the higher rate. “We believe we will earn more interchange this way, and our members will earn more too with the high rate.”

Scott CU also offers Extreme Checking, a program it has offered for 10 years. An .80% interest rate is tied to members making 12 debit swipes per month.

“The credit union earns about 1.05% on every debit swipe, so if the swipes are for a dollar or two, you earn pennies,” said Padak. “But when swipes are for a hundred dollars, you really start to earn interchange.”

What Internal Data Showed

Padak explained Scott Credit Union has significant experience with an account that has given back to members based on swipe totals. He said a study of 10 years of data from its Extreme Checking revealed many members averaged 24 swipes monthly, and those were the members who also spent the most money on their cards. That helped the CU set the spending minimums for Epic Checking.

“We quickly saw that most those folks who met the swipe requirements had high monthly dollar spend of about $750,” Padak said.

As a result, SCU decided to offer a very high rate to encourage members to spend more and drive interchange revenue higher, he said.

Another Goal


Frank Padak

What Scott CU also hopes to do is drive more checking deposits with the account.

“We want to attract more new checking accounts and we think the 4.05% rate will do that,” said Padak. “If you were looking for a checking account and saw one that paid more than 4%, where would you go?”

Padak disagrees that checking account dollars are hot money, even as rates have been rising and competition for deposits has been increasing.

“Checking account money is fairly stable,” Padak told “People tend to keep the same average balance in their account.”

Epic Checking also has a strong tie to mobile banking, noted Padak. To let members know where they stand with their monthly debit spend, Epic Checking offers a “counter” via the CU’s mobile banking app that keeps a running total on debit spend.

“You get members using your checking account and mobile banking app and that’s pretty sticky,” said Padak.

Will Behavior Change?

But will members begin to use their debit card for larger purchases, particularly with all the lucrative credit card rewards offers encouraging consumers to use their credit card for the higher-dollar purchases and debit for the smaller stuff?

“We think this account, with its extremely high interest, compares favorably to credit card rewards programs,” said Padak. “We are trying to get people to use their debit card more than their credit card.”

Padak, who has an Epic Checking account, said it has changed his card usage habits. He said he now places all of his spending on his debit card until he reaches $1,500, and then uses his credit card for rewards points afterward.

Analysts have previously told that many high-rate checking accounts that have debit requirements to receive the great rate are designed for many cardholders to fail to reach monthly goals. Padak said that is not the case with Epic Checking.

“We want our members to use their debit card more because the more they use it the better off the credit union is and the better off they are,” he said.

The Response from Members

Padak said since Epic Checking was introduced Jan. 7, the credit union has opened 2,834 accounts for almost $27 million in balances.

“More than 1,039 of the accounts are new, so about 1,790 are our Extreme Checking members moving over,” said Padak.

Padak said the credit union expected the new account to cannibalize existing checking deposits early, but thinks that trend will slow.

“We have just started advertising the account with TV, billboards and more,” said Padak in February. “We expect to get more new checking members from this.”

Scott also donates a percentage of each debit transaction to the Scott Credit Union Community Foundation, and lets members know that with each debit swipe they are helping their community.

The CU has more than 61,000 checking members and just under 50% checking penetration.

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Word Count: 1065
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Copyright Year: 2019
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