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Mike Welch’s October 17th publisher’s column states that credit unions should consider selling their credit card portfolio. I disagree. While I will agree it is hard for credit unions to compete with the large credit card banks right now, I am not sure their pricing model is one we want or need to respond to. It is hard to compete with offers we all receive in the mail each day for 3.9%, or 1.9%, or even 0.0% APR credit card rates (even if they are teaser rates). In fact, it is impossible for a credit union to offer what is usually our riskiest product (at AFCU our losses are much higher on our credit card portfolio than on auto or home equity loans) at rates below those charged for our less risky products. How can a credit union charge members a rate of 1.9%, or even 0.0%, and pay its overhead, losses and a dividend on our members’ savings? Of course it can’t. And neither can the four large credit card banks that are offering those rates. We all know the old saying “if it sounds too good to be true, it probably is.” Recently an American Banker article stated that two of the four credit card banks were in serious financial trouble. I noticed on the news recently that Providian (one of those that tout a Platinum VISA Card at 0.0%) stock dropped $7.25 to $5.25 per share. No wonder their stock is almost worthless. They can’t (nor can we) make money charging 0.0% even with the interchange fees. The dot.com companies had a business plan that did not seem to make sense, and neither do the credit card mailings I receive every week from the large credit card banks. Could it be that it doesn’t make any sense at all to charge 0.0%? Our rates at AFCU (we currently charge 11.50% APR) do make sense? Why then would we want to sell our members’ credit card loans except to make money off one of our assets? Our credit union’s assets are really our members’ assets as they own the credit union. Why is it in the members’ best interest to sell their credit card balance to a bank? Do we think the bank is really looking out for our members’ best interest? I don’t think so. The purchasing bank (usually one of the four large credit card banks) is planning to make a profit off our members. You can bet that profit is much larger then we are making.Plus they are willing to pay us between 10 – 20% premiums for our portfolio. How are they going to make that premium back? By raising rates to our members after the portfolio is sold? You bet. I for one realize that my credit union cannot always offer the best rates on all products at all times. Someone will always offer something that costs less, but that doesn’t mean that I shouldn’t try to compete. Many of our products are the best in our market, some are not. Just because one of my products is not as low priced as someone else’s doesn’t mean that I should give up and sell out to the competition just to make a buck. That is not in my members’ best interest, and isn’t it the members whom we are here to serve? H. C. “Hank” Klein President/CEO Arkansas Federal Credit Union Jacksonville, Ark.

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