By Brian Scott
What is a credit union’s greatest relationship builder, but is also the most forgotten and least-optimized asset? If you guessed credit card accounts, you guessed right.
Historically, credit card accounts are easily the highest yielding asset in most credit unions’ portfolios. However, once the hard work of getting a card in a member’s hand is done, it is not enough to sit back and wait for good things to happen. Approximately 18 to 24 months into the credit card relationship, attrition typically begins to creep in and a member’s usage patterns start to change.
There are several tactics that credit unions can employ to prevent that attrition, keep the performance of the card program high, and in many cases, grow the profitability of the credit program by following a cardholder’s financial journey through life.
Here are five key strategies credit unions can implement to keep their members happy and their credit card programs profitable:
- Evaluate Credit Scores and Ability to Pay. No credit union would issue a card without closely examining a cardholder’s credit score and their ability to pay. That same logic should apply on an ongoing basis too. At least annually, you should review the credit scores in your portfolio and look for those members that have changed up or down in a significant way. Risk based pricing is not only a good strategy when issuing a card, it’s a great strategy to keep your card top of wallet. Your card products should always be adapting to fit the changing life scenarios of your members.
- Review Credit Lines and Utilization. One of the key results of reviewing credit scores is the ability to adjust members’ credit lines. Many studies show that members’ spending begins to drop when they reach 40% to 50% of their total line. In many cases these cardholders have done a great job managing credit and should be rewarded with a larger credit line. This will ultimately result in higher spending, increased balances and increased finance charge income for your credit union.
- Pair Rewards and Promotions to Your Member’s Lifestyle. Similar to the above, as a member’s financial journey through life changes, so does their desire for rewards and promotions. Early on, most consumers are concerned with low rates and fees since they anticipate carrying a higher balance. Over time, a member’s desire for rewards programs and promotions becomes a larger driver of usage and loyalty. Adjusting these features for your cardholders can have a significant impact on your program’s profitability.
- Invest in Great Marketing. Marketing your card products doesn’t end at the point a member chooses your card. Your members are continually bombarded by offers from other issuers, and marketing to your existing cardholders remains one of the most effective tools to staving off attrition. Typically, others may have flashy offers that may seem attractive to your members, especially if they aren’t consistently reminded of the features and benefits they have come to know with your program.
- Leverage Third Parties. Consistent, positive growth occurs when credit unions execute on strategies and tactics. During times when the payments universe is changing at such breathtaking speed, looking towards your third party relations like a trusted CUSO can be key. CUSOs have deep resources, experience and access to key industry experts and partners, which can be a credit union’s best tools for higher growth, greater relevance and stronger member relationships.
Brian Scott is SVP, Vendor Alliance Partnerships, with PSCU, St. Petersburg, Fla., where he works to help credit unions position themselves competitively in their own communities and maintain profitability throughout their payments programs. Scott has spent 23 years in the highly competitive consumer payments marketplace and is a recognized leader in payments solutions and innovative technologies.