Serving a specific member segment is the point of the Harvard Alumni Card, launched last September by $427 million asset Harvard University Employees Credit Union, Cambridge, Mass. The credit union won the bid to take over this card portfolio when the Harvard Alumni Association’s contract with another card issuer expired.
“This affinity program is a great fit in terms of our mission,” says Cynthia Dacosta, credit card portfolio manager. “A percentage of the proceeds go to a scholarship fund, so it’s a win-win for us and the alumni association.”
Designing the right rewards program was an essential part of encouraging card use and building a successful program, Dacosta says. Cardholders earn points for travel, merchandise, or cash back. To meet alumni’s travel needs, the travel rewards have no blackout dates or other restrictions.
Plus, alumni can select rewards that are Harvardspecific, including a specially designed Harvard chair and gift cards to The Coop, the cooperative campus bookstore.
Another key to success was designating one staff person to oversee the affinity card program.
“I’m responsible for making sure the program is successful,” Dacosta says. “I analyze all the data to make sure the cards are getting in cardholders’ hands and to make sure they’re using those cards. You need someone dedicated to making that happen.”
Harvard University Employees has marketed the affinity card through three email campaigns to 180,000 alumni so far. The program has its own website— harvardcard.com—and the credit union created an “exclusive premium card welcome kit” to promote the card’s benefits.
Although the credit union targeted its affinity card to a special, large group, Dacosta believes a credit union with entirely different member demographics could make this type of program work.
“Look at your field of membership and figure out where your potential lies,” she says.
So you’re reaching out to targeted member segments and you’ve designed your rewards program to give members what they truly want.
Another crucial strategy is to examine your credit lines, says 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’re offering 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, CUNA reports, indicating room for growth.
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