4 minutes
From our sponsor
As 2014 draws to a close, we can say it with certainty: Credit unions are having a banner year with credit cards.
A statistical snapshot at mid-year from CUES Supplier member Callahan & Associates’ FirstLook program provides a sampling of the positive data on credit union credit cards (reported in an Aug. 21, 2014, “Off the Cuff” blog entry by Janet Lee, “New Highs for the Credit Card Portfolio”):
- 16.1 million cards – up 8.1 percent over the previous year;
- $43 billion in balances – an 8.5 percent increase over mid-year 2013;
- cards issued to 16.2 percent of credit union members, a record high; and
- national credit card market share for credit unions hitting 5.2 percent.
CO-OP Financial Services’ records of its own credit card processing clients demonstrate that credit card issuing is among the best ways credit unions can generate organic revenue growth.
CO-OP provides in-house credit and partners with The Members Group of Des Moines, Iowa, to provide full-service credit processing to credit unions.
All told, the CO-OP credit client base has an average growth rate over the past 24 months of nearly 20 percent, with multiple standouts reaching 30 percent to 43 percent growth.
Capitalizing on the Opportunity
Although it seems obvious, it’s easy to lose sight of this: Credit transactions drive both interest and non-interest revenue at credit unions. Especially in 2014!
Are you capitalizing on this opportunity? Here are six suggestions:
First, increase credit lines, especially to creditworthy members. Credit cardholders typically keep their usage under 30 percent of their total lines of credit. If a credit union’s credit card doesn’t have an adequate credit limit, their members may choose to use another card for their major purchases.
Second, a line increase may be useful even for cardholders who aren’t approaching their limits. A viable method is to add products that address credit-bruised consumers such as credit cards that are secured by funds in a credit union savings account.
Third, cross-marketing is an effective way to increase card usage by members. If debit and credit cards together make for an attractive primary financial package, promote credit to debit cardholders and checking accounts to credit cardholders. Credit unions can also win business with balance transfer offers. Responding proactively to current demand and services will help keep a credit union and its credit card business relevant.
Fourth, we know that having a rewards program is table stakes. Now the question is: How easy is it for members to understand? Study the market and best practices for new ideas to make member rewards more engaging – and easy for credit unions and their members to use.
One such idea is Shop Main Street, a Member Rewards by CO-OP program. Whenever members use their credit union-issued credit card at a participating local merchant, the merchant credits the member with bonus points, which are entered into their credit union loyalty program. Members then redeem their earned points for local merchant gift cards or other redemption options.
Fifth, build on credit unions’ strong legacy of service and trust. Consumers have clearly warmed up again to credit, but they are still licking their economic wounds from the Great Recession. Their credit needs – and their credit histories – are different than they were in 2008.
Building on this strong sense of service and trust is a key for credit unions to market any products and services, and right now that effort should be focused on their credit card business.
And that means…
Sixth, be an ally. Credit unions can also help their members by counseling them on how to protect themselves from predatory lending practices – which will undoubtedly increase as credit card usage grows. Members, especially those with credit problems, are inevitably going to receive credit card offers that don’t have their best interests or financial status in mind. Marketing, whether for credit cards, auto loans or general lending, should be based on a consumer-friendly mantra, “We’re on your side and we want your business.” This is a natural marketing theme for credit unions.
Time to Get in the Game
This year has been a great year for credit cards and we think 2015 will be just as good. Offering credit cards makes a credit union are more inviting to members. Now is a perfect time to focus on your credit card program to increase income and add another highly valued product.
Jennifer Kerry is VP/credit issuer processing, for CUES Supplier member CO-OP Financial Services, Rancho Cucamonga, Calif. She can be reached at mailto:mjennifer.kerry@co-opfs.org and 800.782.90432, ext. 7022.
