Why Credit Cards Are the Next Growth Opportunity for Many Credit Unions
That's hard to remember these days with the 24/7 barrage of media reminding us of each economic shortcoming and predicting future disasters. There is a natural tendency to hunker down, hold our collective breaths and wait.
But what are we waiting for? Somewhere in the last six months we have become an industry of people who view the glass half empty. Surely there are trials in our industry. And, of course, you can't open a paper or watch the news without some reason to forego any optimism.
But there is room for us to move forward.
As the media continue to search for the next crisis, an increasing number of talking heads have become convinced it will be credit cards. The nation's largest issuers have fueled the perception that credit cards are due to implode as they make sweeping and negative changes to their programs.
These are the same issuers that have spent the better part of the last decade romancing American families with out-of-control credit lines and unfair teaser rates. Now, they are mistakenly painting all cardholders with the same broad brush based on where they live and without regard to their credit and payment histories.
But that is not true in the credit union industry. The current economic reality has not substantially changed the fundamentals of lending for a majority of credit union credit card portfolios. While as an industry, we represent a small slice of nation's credit card market, it is important to remember most of us are still operating business as usual. People are treated as individuals and not as an account number or a zip code. Cardmembers are not penalized for the anticipated actions of others because as an industry we understand good cardmembers are still paying their bills as a rule, not the exception. While there are challenges and increases in delinquency and charge-offs, credit unions continue to focus on managing risk in the same prudent way they did during the economic boom.
While times are tough, the majority of Americans continue to be responsible. They intend to pay their bills. There are some who will lose their jobs during this recession. It is a factor somewhat out of our control, and if we work with members during this time, we will gain their loyalty for years to come. And, yes, there are some who are not being responsible in their use of credit. But this didn't happen overnight.
Americans like their credit cards, and in many cases, need them. Right or wrong, credit cards have become an important source of liquidity for many of us. There are times when the car breaks down, when there is the unexpected trip to the hospital or there are key necessities to buy. To arbitrarily cut off this source of liquidity by closing accounts or charging high fees because a cardmember lives in the wrong zip code is wrong. It also drives consumers to seek out other options, like payday lending, to fund these extraordinary situations. There is no doubt that is detrimental to our overall economic recovery.
This is where our opportunity comes in. As major issuers take these draconian measures at the expense of the cardholder, we have the opportunity to move credit union credit cards to the top-spot in the members' wallet. While we see the struggles of members, we also see members that remain loyal to their credit union and have every intention of paying their bills.
With prudent risk management that is reinforced by the three Cs-credit, collateral and character-of underwriting, there is potential to gain market share in this environment because credit unions are uniquely positioned to provide a good product with fair pricing.
So what are you going do? Sit on the sidelines, hunkered down hoping to just survive for the next year or two? Or, are you going to start taking steps to grow and capture market share that will enhance your business. From where I sit, this is the best time to fulfill our mission of serving American families and growing our business while we're at it.
Jeff Russell is president/CEO of TMG Financial Services as well as chief information officer/ vice president of The Members Group. He can be reached at 515-457-5475 or firstname.lastname@example.org