Don’t Pinch Pennies on Credit Lines

Once consumers use half of their available credit card lines, they stop adding new charges.

August 8, 2013

Want to succeed in the credit card arena? Don’t be stingy with credit lines, advises Jennifer Kerry, vice president of credit issuer processing at CO-OP Financial Services.

When consumers use half of their available credit card lines, she says, they typically stop adding new charges. Given that tendency, it’s important to make sure your credit lines are high enough to support the promotions you offer members.

If you run a balance-transfer promotion, for instance, “be sure your members have the credit line availability to actually take advantage of the offer,” Kerry says. “If they don’t, you’re wasting your marketing resources.”

Also, be ready to adjust those credit lines from time to time—at least quarterly; monthly if possible. This requires continuous monitoring of members’ credit scores, she says.

Kerry also believes credit unions should consider expanding their credit card offerings to serve members with diverse levels of creditworthiness.

That might entail “changing your risk model a bit,” she says, “so you have an appropriate product for members of all credit grades, down into the 500s. You could create a credit line structure that lets you penetrate deeper into your membership base.”

Whatever decisions you make on whom to target and at what levels to set your credit lines, you’ll need to define goals for your credit card program and then track results.

Typically, the goal is to have your credit union’s card owned and used by a certain percentage of members, Kerry says.

But she recommends a different goal: Total card balances should account for 10% to 15% of all consumer loan balances.

At year-end 2012, credit card loan balances accounted for only 6.5% of credit union loan balances, according to CUNA’s economics and statistics department, indicating room for growth.