If you haven’t taken a long, hard look at your credit card portfolio lately, now’s the time. Are you giving your card program the attention it needs to succeed? What changes could you initiate to reap more benefits for your credit union and members? Are you analyzing for opportunity?
Credit unions that ask those kinds of questions “are realizing they have a hidden gem here, and that maybe they should capitalize on it,” says Chris Joy, director of credit consulting for Advisors Plus, an affiliate of PSCU.
In Joy’s experience, the major hurdle to getting the most out of a credit card program is inertia. Credit unions tend to manage the daily operations of their credit card business, he says, but they don’t do so strategically.
Too often, he says, “they set up programs and then put them on autopilot.”
But Joy cites some developments that are prompting credit unions to be more proactive. For one, economic indicators are improving in general. Plus, credit unions are flush with deposits and need to lend.
A strong credit card program is one way to spur loan growth. “I think the next 18 months will be a great time for credit unions to grow their credit card portfolios,” Joy says.
The rewards race
The first step in sizing up your credit card prospects is to “take a hard look at your product set, especially your rewards,” Joy advises.
He says many credit unions haven’t revisited their product lines since the 1990s, but the credit card business is a fast-moving, highly competitive market that has seen an “explosion of rewards concepts from the major issuers.”
Many credit unions still offer rewards of one point per sales dollar. While that was standard practice a few years ago, offers of 1.25 or 1.5 points per dollar are now luring consumers.
To compete against the big issuers, “the first step is to construct your product set,” Joy says. “Next, you have to sell it to your members and show them the advantages. Credit unions can go toe to toe with just about any product the big banks can issue in the credit card arena.”
The right rewards or loyalty program is key, agrees Nancy White, Fiserv’s vice president and senior business leader for credit solutions. “Loyalty programs definitely drive the transactors [cardholders who pay off their balances in full each month] and transactions generate revenue for the credit union.”
Designing your credit card and reward offerings requires targeting member segments, White says. She lists three key groups that present the biggest opportunities: young adults, business members, and highincome members.
“Your approach to these member segments,” she says, “depends on your membership base and credit card strategy.”
Many credit unions, she explains, want to attract younger members, and the right credit card product can help. Just be sure your promotions offer something they value.
A balance transfer or a convenience check promotion, for example, has no appeal to a young adult who has no other credit card and never uses checks.
“Instead, offer a credit card tailored to that younger audience, such as a credit-builder product,” White advises. Or you might offer student cards. You’ll miss an opportunity if you’re not focused on finding innovative products” that fit certain member segments.
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