Corporate Profile and News

Corporate News

Visa and MasterCard's Loss Won't Be Your Gain
By Dan Caplinger, at MotleyFool.com
May 24, 2010
When new laws decrease fees, you'd think most people would end up better off. Yet the much-ballyhooed new regulation on interchange fees may end up doing ordinary consumers more harm than good.
Earlier this month, the Senate added an amendment to the financial reform bill to limit the amount that credit card processors Visa and MasterCard charge on debit card transactions. Some believe that similar limits on credit card transactions may be next. Although this has a fairly obvious impact on the companies that collect those fees, the real question is this: What will happen to the fee savings?
Collecting spare (inter)change
You'll never see an interchange fee when you're buying something, but it's a large part of what makes credit and debit cards profitable for the companies that issue and manage them. Every time you buy something with a card, the retailer you buy it from doesn't get the full amount of the charge. Visa and MasterCard collect an interchange fee of up to 2.95% plus a small fixed amount per transaction.
As Morgan Housel examined last week, Visa and MasterCard don't get a direct benefit from interchange fees. Instead, they're passed on to the banks that issue credit cards. So with Bank of America, Wells Fargo, and JPMorgan Chase being the market leaders in the debit card industry, they're the ones who will feel the brunt of new regulation. The reason Visa and MasterCard have seen their shares plummet has to do with the secondary impacts, such as the fear that lower interchange fees will reduce the incentives for banks to issue new cards, which in turn would impact the card networks' direct revenue sources.
But it's not the first time that interchange fees have been under attack. Big merchants Wal-Mart and Target have long fought the fees, arguing that they and other retailers should be allowed to bargain collectively to reduce the fees.
What it means for you
Lately, it seems like what's bad news for the banks should be good news for you. Yet it's far from clear whether ordinary consumers will benefit at all from the legislation.
For the most part, customers have never seen the direct impact of interchange fees. The agreements that merchants enter with Visa and MasterCard don't allow them to tack on interchange fees as a surcharge to customers, and although offering a discount for cash is permitted, cash discounts haven't really caught on outside of gas stations.
So just as card users never really suffered from interchange fees, they may never see any direct benefit from new limits on them. Some argue that by reducing their interchange fee expenses, retailers will be able to pass on savings through lower prices. But given how the charges were hidden from consumers in the first place, struggling businesses are more likely to keep the savings to boost profits or cut losses rather than passing them on.
In fact, if the changes are extended to credit card interchange fees, then some consumers could actually end up being worse off. Interchange fees help provide funding for the credit card rewards that so many people get from their cards. Yet as we've already seen during the financial crisis, falling bank profits have started eating away at issuers' willingness to continue rewards programs. With another source of revenue under attack, it's even more likely that customers will face annual fees and other direct costs to offset lost interchange fee income.
Get while the getting's good
For now, though, there are still plenty of ways that you can make the most of your credit and debit card spending. Although few if any rewards outweigh the cost of carrying a balance on a credit card, those who pay their bills in full every month can still end up ahead. Unfortunately, finding the best deals is probably going to start getting a lot harder.

History

A Timeline History of CES Credit Union

Spring 1952: A credit union started in 1951 at the Grove City, Pennsylvania plant of Cooper-Bessemer Corporation inspired some Mount Vernon plant employees to start a credit union for the local plant.

May 1952: Over 450 employees signed a petition declaring an interest in starting a credit union at the Mount Vernon plant.

September 8, 1952: Representatives of seven different departments of the Cooper-Bessemer plant met to officially sign the Articles of Incorporation for a state chartered credit union. The group also named the “Cooper-Bessemer Employees Credit Union”.

September 9, 1952 :The State of Ohio officially approves the Articles of Incorporation for the new credit union.

September 23, 1952: The first shareholders’ meeting is held. 69 shareholders gathered to adopt a code of regulations and to elect these first officers for the fledgling credit union… George Ralston, President
Harry Bennington as Vice President, Dorothy Yost as Secretary and Dan Wintermute, Treasurer. Among the first policies adopted were “ no loan shall be made in excess of $100 without security, and no loan shall be made in excess of $300 with security” and “an entrance fee of 25 cents shall entitle a person to membership.” These initial shareholders and their deposits were the heart of the young credit union.

October 23, 1952 : In less than one month, 178 Cooper-Bessemer employees became credit union members. The volunteers serving as the Board of Directors operated the credit union in a small wood-frame building on the plant ground. Legend has it that the first loan was for the purchase of coal to be used for heat for the upcoming winter.

January 19, 1953 : The second annual shareholders’ meeting was held in the plant’s assembly room with 70 members attending. The Board reported the credit union had received 100 applications since September 1952, and approved 89 of those applications and the average loan funded was $144 per loan.

August 1953 : The credit union hires its first employee, Mrs. Geraldine Lepley, to staff the office on Mondays and Wednesdays for the noon hour and from 4:00pm to 5:30pm.

January 1954 : The Board of Directors discussed at length the granting of loans for increasingly popular refrigerators and televisions, considered a “folly” by one Board member.

July 27, 1960: Plans were started for a new building as “the credit union has been asked to consider the possibilities of moving from within the confines of the Cooper-Bessemer gates” according to Board minutes.

August 1961 : Mrs. Eleanor Porterfield is hired and begins a 21 year career at the credit union. She would become Office Manager and helped grow the credit union with her personal relationships with the members who regarded her as a grandmother figure.

January 8, 1962 : The Cooper-Bessemer Employees Credit Union opens the doors to a new concrete block building at the corner of West Chestnut Street and North West Street adjacent to the plant. The lot was purchased for $10,000 and $21,500 was spent on the construction of the building. The building featured the first drive-up window in town, with a wooden manual slide-out drawer for members to use from their vehicle. Later in 1962, the credit union hit $1 million in assets on the credit union’s tenth anniversary.

March 10, 1976 : Cooper-Bessemer Employees Credit Union undergoes many changes. The name is changed to CES Credit Union to better reflect the new name and status of Cooper Energy Services. Tough economic times locally and nationally helped make a decision to welcome groups outside of C-B/CES to help diversify the membership, and make the credit union less susceptible to the ups and downs of one particular company and industry. The Knox County Labor Council was the first to become members under the new rule.

November 21, 1978 : The Martin-Marcy (Hospitals) Federal Credit Union agrees to merge with CES Credit Union.

July 1982 : James Depue begins his lengthy tenue as he is named General Manager of CES Credit Union following the retirement of Eleanor Porterfield.

December 1983 : When Bethpage Federal Credit Union of New York decides to break off their Delaware and Loudonville credit union offices located in the GAC-Flxible bus manufacturing facilities, CES Credit Union agrees to fold in these offices and staff, and continues operation inside the plants.

Summer 1988: A major expansion and renovation of the West Chestnut Street location more than doubles the office space there. July 15, 1996 : A ribbon-cutting ceremony opens a newly-constructed $1.8 million CES Credit Union office at 1215 Yauger Road on Mount Vernon’s growing eastside commercial area. Senior management offices move to the new office. That same month, CES Credit Union moves out of the soon-to-close Flxible bus plant in Delaware, and re-opens in offices at 325 South Sandusky Street in Delaware.

2001: The Ohio Division of Financial Institutions approves the application submitted by CES Credit Union to open membership to all who live, work, worship or attend school in Delaware and Knox counties. The credit union ends 2001 with almost $66 million in assets and 16035 members.

September 2002: Capping off several months of celebration, CES Credit Union turns 50 years old with over 500 members attending a Golden Anniversary Celebration.

December 15, 2003 : On a cold and snowy morning, ground was officially broken for a new credit union center at 33 London Road in Delaware. The million-dollar facility opened for business on Monday August 23, 2004 and included a drive-up ATM and two remote drive-thru lanes.

2005 : Kelly V. Schermerhorn is hired as Vice President of Operations, with the intent of stepping into the CEO role within a few years. Barbara Butler, Vice President of Operations, retires in December 2005 after over 40 years of valued service to the credit union.

2006 : In April, James Depue is named 2006 Professional of the Year by the Ohio Credit Union League. Following the August purchase of a Huntington banking office in the village of Utica, CES Credit Union opens the renovated office at 8 North Main St in November. Also in 2006, the state regulators also allow CES Credit Union to add the Ohio counties of Licking, Ashland and Richland to its field of membership.

April 1, 2007 : James Depue announces his retirement in July 2007. Kelly Schermerhorn assumes the CEO responsibilities in August. The end-of-March 2007 financials reveal CES Credit Union assets have topped the $100 million mark for the first time.

September 2008: A new credit union center opens in the village of Loudonville, on State Route 3 just south of Wally Road. The previous location was located inside the MCI bus manufacturing factory, the same building that previously housed Flxible. The credit union operated a temporary store location downtown during construction of the new center.