WISCONSIN RAPIDS, Wis. – David Stark, the CEO of the $92 million Bull's Eye Credit Union, admits that, for a CEO, admitting to an erroneous judgment can be a challenge, but when it comes to his credit union card portfolio he cheerfully acknowledges his mistake. "I was pretty firmly of the opinion that our best course of action was to sell the portfolio," Stark says now, "but I was wrong." Not, he noted, that he didn't have good reasons for his opinion. "It seemed to me that we were losing about $1 million dollars a year from the portfolio," he said. "We weren't competitive with it and I doubted that we could be.' According to Stark's memory and NCUA records, the credit union had seen its portfolio drop from almost $7.7 million in March 2001 to just over $6.1 million in March 2003, a phenomenon many credit unions, Stark speculated, can experience. "We had a pretty generic program," Stark said. "We issued cards but really hadn't kept up as much as we could have in changes in the industry and really managed the program in light of those changes." Bull's Eye differed from many credit unions in that it offered both Visa and MasterCard products, a quirk which Stark related to the local and national card markets at the time the CU began issuing cards. Visa was becoming the steadily dominant brand, Stark explained, but MasterCard was still very strong so the credit union opted for both. But while it had two card lines, it still had essentially the same card from each brand -a Classic card which offered a 12% interest rate. When rates were higher the cards performed well, Stark reported, but when interest rates began to change and greater rate competition began to come into the industry, their performance would fall. Stark began to think about selling. His thoughts came to a head, he reported, when he and Rosemary Siems, the credit union's card manager, traveled to one of the leading purchasers of CU card portfolios to take a tour and see what the firm could do for them. Stark reported coming away from the meeting encouraged and more resigned to selling, but Siems, he recalled later, was not. "Rosemary came away from the meeting more convinced than she had been that we could turn the program around," Stark said, "so I gave the card management staff a year to do it. If they couldn't at least slow the slide in a year, we would sell." The credit union turned to its processor, Certegy, for help, and got advice on how to survey its members about the sorts of things they wanted in a card and how to conduct direct mail offerings. Most significantly, the credit union expanded its credit card offerings and changed its interest rates, essentially, Stark agreed, taking some of the card management strategies that the card issuing bank would have used for the portfolio. Bull's Eye shifted, manually, most of its 12% Classic cardolders to its new 7.9% Platinum card and included an 3.9% balance transfer offer on that card as well, and modestly increased credit lines. The credit union took pains to make sure that any of its members who used their card to make revolving or regular payments would have the time they needed to make the change and increased the interest rate on the Classic card to 14%, making it essentially a credit builder or introductory credit card. Even with the higher interest rate, the credit union still heard from a few members, particularly older ones, who demanded their Classic card back after the change. "They pay their balance every month so they don't particularly care about interest rates," Stark reported. "They liked their Classic card and they believed that we shouldn't change it, so we gave them back their Classic card." The credit union also began to offer more card products, a Visa and MasterCard Gold card, each at 9.9% interest rates but with either a rewards program (Visa) or a cash back rebate program (MasterCard). Even though Stark is mildly disappointed that the direct mail program had not yielded better results, the overall impact on the changes on the portfolio have been very strong. Since the low of $6.1 million in March of 2003, the credit union's portfolio has risen to almost $10 million, as of September 2004, an achievement which, Stark said, led to he and other credit union executives grilling steaks for the staff at a big celebratory barbecue. "Rosemary reminds me regularly that I was wrong about the portfolio," Stark says, "but seeing how they have turned it around I am glad to hear that I didn't have it right." For now, the credit union will focus on retention and on cautiously looking at increasing credit lines, something that the credit union has been very careful about doing, Stark said. He also noted that with a card penetration which stayed essentially the same, moving from 36% in March of 2003 to 39% now, the card battle the credit union fought was essentially over whose card was going to be at the top of the wallet. Providing the cardholders with the rates and cards they want, he noted, means that they will use the card. The trick is to get a good idea of what it is they want, he explained. -

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