Skip navigation

SYSTEMS MERGER CREATES BIG DEBIT CARD NETWORK

DEARBORN, Mich. -- Use of debit cards by supermarkets is getting a major boost in the Midwest with the merger of point-of-sale and automated teller networks owned by Magic Line here and Chicago-based Cash Station.The consolidation will form the largest electronic funds transfer network in the United States, with more than 11 million debit cards and 7,000 automated teller machines. About 15 million

DEARBORN, Mich. -- Use of debit cards by supermarkets is getting a major boost in the Midwest with the merger of point-of-sale and automated teller networks owned by Magic Line here and Chicago-based Cash Station.

The consolidation will form the largest electronic funds transfer network in the United States, with more than 11 million debit cards and 7,000 automated teller machines. About 15 million transactions will be processed each month.

The merger should boost supermarket use of the cards because it brings together 1,100 financial institutions, their merchants and individual customers.

Major grocery retailers already on-line with the debit card service include Cincinnati-based Kroger Co., Jewel Food Stores, Melrose Park, Ill., and Spartan Stores and Meijer Inc., both based in Grand Rapids, Mich. Several dozen smaller chains also are participating in the program, including Chipain's Finer Foods, Lemont, Ill., Island Foods, Island Lake, Ill., and Berwyn Finer Foods in Chicago.

"We look at debit cards as our preferred method of payment, although we do take credit cards," said Gene McDonald, Spartan Stores' lead information analyst for electronic payments. "If customers are at all concerned about holding up the line while they write a check, debit cards will speed things up, as well as speed up the transaction for the merchant."

Already on-line with Magic Line in Michigan, Spartan hopes the merger will help it attract customers from Illinois and Indiana, where Cash Station cards are now used. "We would like to see a 10%

growth in vacation months," said McDonald.

Fees should be less than credit card use. Most banks in Michigan are charging debit transaction fees in line with fees charged for writing a check, McDonald said. Normally, fees charged for using credit cards to pay for groceries are a percentage of the sale.

"Debit cards are good for supermarkets because payment is guaranteed. The transaction is only approved if there are funds in the account," said Catherine Alexander, senior vice president of Cash Station. "Overall, it's easier to manage than cash in the drawer."

"Debit cards also encourage impulse buying because people aren't limited to the cash they have on hand," she said.

Growth could be exponential. "The combination of the Michigan, Illinois and Indiana ATM and POS markets makes great strategic sense and will increase economies of scale significantly," said Donald Gibbins, senior vice president of First National Bank of Chicago and chairman of the board of Cash Station.

Adds David Distelrath, executive vice president of First America Services, Kalamazoo, Mich., and chairman of the board of Magic Line, "The consolidation allows us to offer customers throughout the Midwest more convenient services and permits development of new electronic banking products."

The consolidation is subject to regulatory review, but is expected to close in July.