Reputation, More Than Marketing, Is the Key to Unlocking Card Success
ALEXANDRIA, Va. -- Credit unions often believe that they must reach a certain asset size before they can start seeing strong performance from their credit card portfolios.
However, according to NCUA data, the 10 credit unions with the highest percentage of their assets in credit card receivables have $37.0 million or less in total assets.
The three credit unions with credit card receivables making up the highest percentage of their overall assets are the $37.0 million Acme Continental (30.5% from cards) in Riverdale, Ill.; the $4.9 million Snake River Federal Credit Union (23.2% from cards) in Twin Falls, Idaho; and the $19.0 million Bridgeport Fire Department Employees Federal Credit Union (21.3% from cards) in Bridgeport, Conn.
To some extent, this is not surprising: Credit card receivables would naturally be a bigger part of a smaller credit union. But despite their smaller overall size, these credit unions' card programs are well-managed, often using innovation and reputation to keep their cards at the top of their members' wallets.
Acme Continental's CEO, Joseph Kristinat, is up front about not really knowing exactly why the CU's credit card programs have enjoyed such popularity. "Our members have always just really liked our cards," Kristinat said. "We don't really know exactly why, but we believe they like it that we just offer a straight card."
Acme has a community charter of almost 7,000 members and a history of SEGs over its more than 70 years in business. These SEGs have included a steel plant and insurance companies, many of which either closed, were sold or merged with something else.
A "straight card," Kristinat and marketing manager Deborah Bordowitz explained, means the credit union "played straight with members;" it didn't offer teaser rates and didn't hit cardholders with too many fees. The CU does not charge an additional fee for balance transfers, Bordowitz explained, and in the 21 years she has been at ACME, the CU has raised the fee for late payments only once, from $10 to $20.
"We were getting hit back in the early 1990's when we put a fee on our cards because everyone else was doing it and a lot of our cardholders left us," Bordowitz said, "but then when we took it off, they came back. The CU has a card penetration rate of 75%, one of the highest in the industry.
"We don't have the most competitive rates around, but we're not the worst," Bordowitz said. "Our members know that our rates are our rates," she added. Acme broadly uses risk-based pricing for its cards but does not base its card rates on credit scores alone, Bordowitz said.
Kristinat and Bordowitz also said the CU has put a lot of money or effort into marketing the card. Recently Acme upgraded its card program, which used to be divided among a Classic, Gold and Platinum platform to an entirely Platinum platform. The CU kept everyone's rates the same through the upgrade, explaining to members that it was merely doing so to improve card prestige, Kristinat said.
As an example of the card marketing that Acme has done, Kristinat said, Bordowitz stood in the middle of the lobby of the main branch and asked to see the Visa card of any member who came through the door. If the member had Acme's Visa card she gave them $20. If they did not, she directed them to the side where another staff member took and processed a card application.
Bordowitz stressed, however, that the lower level marketing masked higher intensity card portfolio management. For example, she made sure that the card portfolio was examined regularly for inactive or closed accounts and those were addressed.
Both Bordowitz and Kristinat returned to the theme of members choosing their card because of the reputation of the CU for dealing fairly with its members generally, a part of CU card marketing that credit unions have not generally taken up.
Snake River's CEO Tracey O'Donnell attributed the popularity of her CU's card to a mixture competitive rates and strong member service. Snake River allows its members to pay their Visa bills through direct withdrawal from their paychecks, a process that O'Donnell acknowledged is possible with her CU's 195 card accounts that might not be practical for 1,000 card accounts.