Our Approach to Credit Cards
Nearly everyone has to have a credit card these days –to purchase an airline ticket, to shop online, or to reserve a hotel room. Credit card debt can be daunting and credit card fees can be exploitative, so Beneficial State Bank (Beneficial State) offers only responsible credit card alternatives. In partnership with our issuing bank and affinity card partners, we provide a totally differentiated product that provides revenue to environmental and social justice organizations, while simultaneously depriving such resources from banks engaged in anti-environmental or anti-justice activities. Now that's a REAL change!
Here's how it works, credit card fee revenue comes from the interchange fees charged of merchants by Visa and Mastercard to use their "rails" or, as we call it, financial highway. Visa and Mastercard share a small portion of those interchange fees back to the "issuing bank" and in turn, the issuing bank shares a portion of their share with the bank that markets the card for them. The issuing bank underwrites the applicants for the card – making sure they have the income to service the debt – issues the cards, services the accounts, and collects any debts. Many of the big banks serve as both the issuing and the marketing bank for their credit card programs. You see them regularly in TV and print ads.
Because of the fee structure, it's really a volume business. As an efficient way to gain new credit card customers, marketing banks look to partner with large memberships or affiliations, like Sierra Club or United Airlines, in hopes of recruiting some of their values-driven members. They use "me rewards" like merchandise or mileage to seal the deal in what has become a very competitive landscape. These for-profit and non-profit organizations are called “affinity groups” and the arrangements they have with big banks are called “affinity card programs,” just like ours. However, the similarities with Beneficial State's program stop there.
Because of their bargaining power, big banks only have to share a tiny fraction of their interchange revenue with the affinity group, especially in the case of smaller, less commercially powerful affinity card partners. We extend as much of the fee as we can while remaining economically viable in providing the card. In the case of mission driven organizations like Sierra Club and Salmon Nation, it is also very likely that the main activities of the big banks -- their lending activities, their securities portfolios, and their consumer banking practices -- run afoul of the very mission values these organizations and their members hold so dear. This mismatch comes from a profit-maximizing bank serving an organization with a double or triple bottom-line, that doesn't share, respect, or in many cases, even know.
Beneficial State Bank serves that triple bottom-line every day. Its bylaws mandate that the bank achieve social justice and environmental well-being, while being financially sustainable. Even Beneficial State's ownership reinforces its mission because all its economic rights are owned by a non-profit, Beneficial State Foundation, which is in turn, required to invest any distributed bank profits into the low-income communities and environments we serve. There is no private shareholder at Beneficial State insisting on profit-maximization at the expense of those other important bottom-lines. Also, our issuing bank TCM Bank, N.A. has similar incentives as a bank owned by all the community banks through their consortium, the Independent Community Bankers Association.
Together, Beneficial State Bank and TCM Bank, N.A. offer an utterly different value proposition to those credit cardholders who care deeply about what their financial supply chain supports. With ever better information, cardholders can discern whether a big bank's lending funds logging in the rainforest, predatory financial services in low-income settings, or mountain-top coal removal. As mission organizations have learned, their members don't want fee-share enabling activities that are antithetical to the mission of the organization they joined. Those members need and want an option to choose a credit card aligned with their values.
Beneficial State Bank and TCM Bank, N.A. can still offer "me rewards" and do, but by their very nature, they serve the integrated values of affinity card program members. In addition, Beneficial State is seeking to develop new rewards programs with partners that also reward local purchasing or charitable donations. And remember, Beneficial State's core banking activities are actually working to ameliorate social justice issues and promote environmental well-being, instead of amplifying current challenges! Nearly 75% percent of Beneficial State's loan dollars go to support businesses and non-profits explicitly serving social justice sectors and supporting environmental sustainability. Beneficial State’s staff works very hard to ensure that the other 25% does not contradict our mission.
Against an otherwise fully mature and intensely competitive credit card market, Beneficial State and its issuing bank partner TCM Bank, N.A. offers a real affinity card that totally aligns with the values of many mission-driven membership organizations. In an era when non-interest fee income is critical to surviving as a bank, it's no small thing to take it away from banks that don't support the societies in which it functions and to send it to socially responsible community banks. Therein lies the opportunity not only to take market share that directs significant revenue shares to those membership organizations, but also to shift non-interest fee income from the large banks, back to Beneficial State and other financial institutions that support and strive toward a triple bottom-line mission.
That's what we call Beneficial Banking!