Credit Unions Can Use Their Relationship Advantage to Beat Out the Large Card Issuers
It is often said that in today's competitive and increasingly sophisticated credit card marketplace issuers must offer complex and expensive products, promotions, and services to be competitive. But for many of the small to mid-size credit union issuers, those programs are often neither appropriate or financially justifiable. Because TNB Card Services provides credit and debit card processing for credit unions with assets ranging from over a billion dollars to very small credit unions, we see effective programs of all sizes. While large CU issuers focus on implementing more sophisticated programs such as risk-based pricing and rewards programs, many mid- to small-sized credit unions see success by focusing on the strength of their relationships with their members and offering a more straightforward but competitive card. Clearly, consumers are growing more interested in establishing a bond with the companies they patronize. For example, a 2003 survey by Edgar, Dunn & Company showed that 33% of households preferred a co-branded card. That percentage was up from 25% in an earlier survey. This demonstrates that when considering credit cards, people are interested in doing business with an organization or company they know and are comfortable with. That is a natural tendency, and one that credit unions can leverage to their advantage, since the big card issuers can't provide that emotional connection. For most consumers, contact with the big card issuers is limited to receiving a bill with a short payment timeframe and the imminent threats of large late fees and higher interest rates if the payment isn't received on time or increased rates if they are reported late on other bills. Clearing up any problems with the big issuers is usually a frustrating experience. People tired of this type of treatment from large credit card companies are excellent candidates for credit union membership and card accounts. Current credit union members - and this is especially true in the case of mid-sized and smaller organizations - have trust, loyalty, and experience invested in their dealings with the credit union. It doesn't take a card product with all the bells and whistles to entice these individuals, just a fairly priced product they are comfortable with. What credit unions must do is make their card programs an integral part of their entire brand. Survey after survey shows that many members - sometimes up to 25%- are not even aware that their credit union offers credit cards. Effective branding and promotions can overcome that lack of awareness. Members will be a receptive audience if a mid-sized or smaller credit union can offer a card, preferably a Platinum card, that is at least competitive in terms of interest rates and credit lines to what members see in the broader marketplace. A credit union will usually find that many members are willing to give up some of the "perks" they get from the big card issuers for that important feeling of comfort and security with a familiar company. People are not going to walk in and ask for card products; they expect to have them offered to them. A card offer should be part of the introduction whenever a new member opens an account or the credit union makes other loan products available. The credit union should be proactive by cross-selling a card to those members. It is important for mid-sized and smaller credit unions to actively promote their card products through balance transfer offers, for instance, or offering convenience checks as another method of moving balances from competing cards to the credit union's card. Our mid-sized and smaller credit unions have done well with post-holiday balance transfer offers, as well as post-summer-vacation transfers. They typically achieve a response rate of better than 2%, with an average balance transfer check of at least $3,000. Credit unions should expect their processors to offer these types of promotions to help grow card portfolios. Marketing efforts are most effective when they are regularly offered and the means of contact are varied. Emphasizing credit cards through statement inserts, direct mail solicitation, e-mail notification, Web site promotion, and articles in the credit union's member newsletter help to broaden the chances that members will notice and make note of the card program. These are all low-cost promotional tactics. In-branch promotions and activities - signage, contests, and the like - are another low-cost promotional opportunity. Along these same lines, offering incentives to the staff for opening card accounts for members can be very effective for mid-sized to smaller credit unions. For them, as compared to other financial institutions, relationships matter more, and person-to-person selling works very well. Mid-sized and smaller credit unions have a powerful relationship advantage over the big issuers. When that is teamed with a viable and visible card program and consistent promotional efforts, it's a program the big guys can't beat.