Years ago, I was the CEO of the Delchamps Credit Union, a CU that served the needs of the employees and family members of a regional grocery chain. At one point, our sponsor company asked that the credit union take over and run a 23 ATM in-store program, which a local S&L was abandoning as unprofitable. This is the short version, but in the end we were running 110 ATMs for the sponsor; our members had surcharge-free access to their money; and it was minimally profitable to Delchamps.
It was profitable because we were charging non-members a 25-cent surcharge. At some point the company decided that if 25 cents was profitable, the standard $1 surcharge would be better. Our arrangement was such that the credit union was keeping 50% of the profits, or about $1,200 per month, for our work in managing the network. This quadruple increase in surcharge would have astronomically increased our share of the revenues in this growing network, except that the grocery chain wanted to keep the increased revenue. We reworked our arrangement and began charging the company a flat $100 per ATM per month. In the course of a single month, we went from netting $1,200 per month to netting $11,000 per month. At the same time, we raised our dividend rate, purchased excess share insurance from American Share Insurance, and eliminated member ATM fees completely. The net to our bottom line was a decrease of nearly $1,000 per month, but we were still comfortably into the black ink.
My contention has always been that this highlighted a primary difference between credit unions and banks. My volunteer board took this windfall and redirected it back to the members with enhanced service, lower fees, and an increased dividend. Had the board of directors at any local bank been faced with this same set of circumstances, does anyone really believe that the bank customer would have known anything about it? No, I do not believe that they would have. The bank may have paid a higher dividend to their shareholders, but that would have been about it.
Steve Pollman is President/CEO of Magnolia Federal Credit Union, Jackson, Miss.
Personal Recollections of CUs: A CU Journal Series
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