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In 2000, The Desert Schools Federal Credit Union credit card portfolio stood at just over $60 million, about where it had been in 1999-and for that matter, in 1998. Approximately 20% of our members held a Desert Schools Visa card. And although our members were loyal to us when it came to checking accounts and auto loans, there was almost no loyalty when it came to our credit card. Despite repeated efforts to increase our credit card business, the Visa card simply did not enjoy “top of the wallet” status. It was not the first card our members reached for when they made a purchase. Today, the Desert Schools credit card portfolio stands at nearly $110 million in receivables-more than 70% higher. More than 15,000 additional members carry the Desert Schools Visa card. And we know why. Our members have access to valuable new benefits, better pricing and improved service. As a result, the Desert Schools Credit Union credit card has moved up in our members’ wallets. This transformation began because we decided to think of our business in a new way. And it continues today, thanks to the partnership we forged with MBNA America. The decision to sell our credit card portfolio – particularly to a bank – did not come without great consideration. But several issues made the decision easier. First, we faced the reality that we lacked a competitive edge. We didn’t offer a rewards program, rebates, or low introductory rates-features that were fairly common for bank credit cards. We learned through focus group research that our members had come to expect these extra features, yet it was simply too expensive for Desert Schools Credit Union to offer them. Also, our credit limits were lower-in many cases they were less than half the limit on typical bank credit cards. Yet, unless we were prepared to assume much more risk, we felt we were stuck with being the second or third card used by our members. Then there was the matter of customer service. Our in-house customer service department only took calls between 8:00 a.m. and 5:00 p.m., Monday through Friday. We had a relationship with an outside vendor to handle calls on nights and weekends, but the service was not up to Desert Schools’ standards. Facing these practical issues made it easier for us to consider a partnership for our credit card business, but there were also philosophical issues and questions that needed to be answered to the satisfaction of our board of directors. If we were to partner with a bank, we had to know: * What name would appear on our credit card-Desert Schools? The bank’s? * Could a bank provide the same level of service members had come to expect? * Would a bank use its relationship with Desert Schools to market other products or services to our members? * Would our members get the extra features they wanted? One by one – and contrary to what many industry insiders would have had us believe – each question was answered to our satisfaction by MBNA. In 2001, we sold our credit card portfolio and entered into a partnership that continues to work in our favor. Today, the credit cards our members carry bear the name “Desert Schools.” The MBNA BankCard Services name only appears in small type on the back of the card. The service our members receive is superior, with telephone representatives available 24/7 every day of the year. MBNA is prohibited from marketing unrelated products to our members. We now offer low introductory rates, and soon members who carry our card will be able to participate in a valuable rewards program .Credit limits for most members have increased, substantially removing the single largest barrier to increased member usage of a Desert Schools credit card. Prosperity and Improvement Our members have benefited in numerous ways since we entered into a partnership with MBNA. Desert Schools Federal Credit Union has also benefited. We took the money we received for the portfolio and reinvested it in real estate secured loans. In addition, we have taken the revenue sharing that we receive, which is based on a percentage of every finance charge the bank collects from our credit cards, and we have used it to open new branches, install more ATMs, expand our real estate and small-business lending programs and generate more growth from our debit cards. The bottom line? We earn more from the credit card program today than when we managed it ourselves. Our new partnership also resulted in an unexpected benefit – and a fundamental change within our credit union. Like most credit unions, we thought we offered the best possible service to our members. And in many ways we did. But we had no way of measuring service or identifying areas that needed improvement. Thanks to programs and ideas that MBNA shared with us, we are now able to measure service quality against several standards. For example, we now know how long it takes to answer a member’s question, resolve a complaint, fulfill a request for a loan or issue a new debit card or credit card. And because we receive weekly service reports on all these transactions, we can spot a problem in its earliest stages and resolve it quickly. Postscript Every week I field phone calls from credit union colleagues who want to know how I feel today about the decision we made at Desert Schools Credit Union nearly three years ago. The skeptics want to know what the catch is. The optimists want to know who to call and what to ask to get started. I tell them that three years ago, there were both skeptics and optimists at Desert Schools. But today, there are just optimists. Our members have a credit card they are happy to use. And Desert Schools Credit Union has the resources it needs to continue to grow and to serve our members better.

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