Credit unions regularly tout the fact that they offer a better deal, so Michigan State University Federal Credit Union is working to prove that with a $1 million challenge.
Members who transfer a higher rate loan or credit card balance to MSUFCU until March 31 will have a chance to win $500. Three names will be drawn and each will receive the equivalent of their savings up to $500. If they save $350 over the life of their loan they receive $350. If they save $1,000 they collect $500. The credit union hopes to collectively trim its members' total loan interest by $1 million.
April Clobes, executive vice president, explained that the credit union-like many others-is trying to cope with a decline in loan volume. Last summer MSUFCU ran a transfer promotion for its Visa card and noted that the loans being switched had carried interest rates of 21% or higher compared to 9% at the credit union.
So the idea was discussed of a promotion that would encourage members to evaluate their current loans and determine if it made sense to replace them.
"We were trying to put a dollar amount on what we thought we could save members," Clobes said. "The staff suggested $1 million and I panicked. But when they calculated the number of members we have and how much we might save each one, it seemed realistic."
The challenge started Jan. 5 and seems to be off to a strong start. When a member transfers a loan, staff can enter the transfer and savings on an intranet site. By the middle of the month data showed members had saved $48,642.
"We've seen all sorts of loans-auto loans, motorcycles and RVs, credit cards, signature loans," Clobes noted. "We did not put mortgages in the mix because we'd have to do a refinance, and it's difficult for a lot of people to refinance because they may be upside-down. We've seen significant declines in home values in Michigan."
At this point members transferring credit card balances seem to be gaining the most. Members who had been paying as much as 29.99% interest have cut that to 10.9%. Auto loans have also recorded significant savings.
The $1 million challenge is being promoted on the credit union's website, billboards, radio and television spots and direct mail.
The hardest job, Clobes said, is "cutting through the clutter. We strongly believe that most of the time we can offer a better rate or a better service. It's a question of finding the right way to tell that to our members so they will notice the message."