"In general economic terms, 2009 is going to look like 2008," said Robert Hackney, president of Card Services for Credit Unions. "But we expect that the trends toward better card management and marketing that we have seen will continue and that cards issued by credit unions will remain the strong opportunity that they have been."
CSCU is the association of credit unions that process their card transactions with Fidelity National Information Systems.
Hackney and the other card executives cited the strong positions credit union card assets have in relation to other assets and strong consumer demand for available, reasonably priced credit as reasons for the continued strength. Possible brakes on the growth of CU card portfolios in 2009 included increased delinquencies and charge-offs as CU members struggle with the poor economy and a possible consumer desire to pay down debt.
If the executives' optimism proves warranted, CU card portfolios will run counter to an overall card market that faces a good deal more difficult outlook as bank card issuers trim credit lines and significant numbers of cardholders pay late or default on their debts.
The executives agreed that credit union may face those trends as well but countered that credit union's historically strong conservatism when it comes to credit card lending-a conservatism that many of them have seen as often hampering the growth of credit union card portfolios-will insulate them from some of the worst impacts of the economic downturn.
Card consultant Ondine Irving, owner of the consultancy Card Analysis Solutions, has said she has stopped advising credit unions to perform balance line increase programs in a routine manner until the economic situation clears but acknowledged that she has strongly advised them in the past to start them as one element of successful card portfolio management.
She still believes targeted and responsible credit line increase programs have a role to play when the economy turns up again, but for now she urges credit unions to be even more prudent in their lending and work with members on a case-by-case basis to meet credit needs that other lenders may have neglected.
Glenn Schechter, director of card services for PSCU Financial Services, largely agreed with the other executives but said he would not feel comfortable with CU card portfolios until after it became clear how many consumers were going to work to draw down debt in 2009.
PSCU is the payments CUSO for more than 500 credit unions.
"As we all know, drawing down debt is a No. 1 or No. 2 New Year's resolution for consumers, but this year we might see more people actually make a significant dent in their debt load. If that happens, it's unclear how much of an impact that might have on CU card balances."
Prospects also look strong for debit cards, according to Tom Gandre, chief debit officer for PSCU. Gandre pointed that out that while consumer spending might slow or even drop slightly in 2009, debit cards have continued to make progress against their biggest competition, cash and checks.
"The good news is that people might spend less these days, when they are spending they are reaching for the debit card to do it," Gandre observed, adding that while every transaction by check costs a credit union money, every time a member swipes a debit card they end up making the CU a little bit of money.
He also countered speculation about whether or not debit cards in this current down economy might end up taking transactions from, or cannibalizing, a CU's card programs.
Gandre pointed out that the patterns for card use between the two kinds of cards are pretty well established and that he doubted that consumers would start using their debit cards to get the kinds of things they have usually used their credit cards to buy.
"Debit cards are very popular for the necessities of life-the gas station, the grocery store, the pharmacy," Gandre said. "They have never been much for the expensive night out or the theater tickets or the big event. I don't see that changing."
All the executives interviewed agreed that credit unions faced a tight rope with their card programs in 2009, on the one hand letting members have the credit they needed while making sure they remained able to repay the loans. But all the executives remained firmly convinced that CUs would be able to walk the tightrope, and Hackney and Irving predicted the trends toward improved card management practices would continue.
Hackney in particular saw the coming year as being especially strong for the actively managed portfolio program. A credit union participating in the AMP program signs one yearly contract that enables FIS to actively manage its card portfolio through a broad array of different programs. Hackney believed this "one and done" approach might be particularly appealing to credit unions trying to navigate a lending path that both protects them from undue risk but also seeks to enlarge the portfolio.