By Bryan Sims
Citi Cards is at it again. The leader in college credit cards has teamed up with mtvU to co-launch the "Citi mtvU Card for College Students" in the biggest push for young adults and college students the financial sector has ever seen. (mtvU is a relatively new MTV network geared exclusively at college students.)
As a fully integrated credit card program on mtvU's Web site, the Citi mtvU alliance could very well be the first nail in the coffin for credit unions if they don't wake up and change quickly. The partnership is much more than a cross-promotion; it is a joint program hailing both Citi and mtvU. Integrated with Citi's latest "Thank You" campaign, cardholders can save points for exclusive rewards such as tickets to the MTV Video Music Awards or tours of the mtvU Studios.
While credit unions often blame banks like Citi for driving bankruptcy rates higher, Citi is changing its tune and rewarding students for things like paying their bills on time and paying more than the minimum monthly payment. In an effort to help improve credit scores "building good credit" is a theme often mentioned in the Citi mtvU campaign.
The impacts of this will be seen 5 or 10 years from now when credit unions have no more borrowers ... because they all got their first credit card with Citi and MTV.
With the brand power behind this offering, how can credit unions compete? Here are a few suggestions from my company, brass|MEDIA Inc., which specializes in helping credit unions connect with young adults:
Tips for a successful young adult/college credit card program
- Never turn someone down simply for "no credit." On average, a negative experience will cause someone to relay their bad experience to 7 people through word of mouth.
- Automatically approve any applicant with no credit history up to a $500 limit.
- Utilize credit-based lending practices with lower rates for high scores, and higher rates for low scores. For no credit, use a C-level rating as a standard.
- Allow automatic limit increases from $500 to $1,000 if an applicant provides a copy of a student ID, military ID or proof of employment.
- For limits over $1,000, do one of the following: Verify proof of employment, increase credit based on the length of time the card has been held, or have a co-signor.
- Issue cards to 16- and 17-year-olds with lower limits of $200 and $300. For higher limits, require a co-signor.
- Reward cardholders for positive habits such as paying bills on time, and paying more than the minimum monthly payment.
- Reward cardholders for utilizing online banking, online bill-pay, and e-statement features for reduced costs for the credit union, and increased activity of the member.
- Reward members for maintaining high GPAs.
- Do not have an annual fee.
- Charge a $20 fee if the card is not used at least once per year.
- Begin with 0% APR for the first six months and then begin charging interest.
Bryan Sims, CEO of brass|MEDIA Inc. and publisher of brass|CU recently spoke at CUES' Execu/Summit. He is currently working as a consultant for the Filene Research Institute on its COOL Solutions initiative and report for attracting and retaining young adults and young families in credit unions.
