Credit unions need to recognize that avoiding too much risk in a card portfolio is, in itself, a risky thing to do.
That is the point of view of Brian Scott, vice president of sales for The Members Group, a payments processing CUSO affiliated with the Iowa Credit Union League.
“To build a truly sustainable credit card program, loan officers must look beyond A-paper applicants, encouraging customers and community members with less-than-perfect credit histories to apply,” Scott wrote in Credit Card Portfolio Best Practices for the Modern Payments World, a new white paper on credit card portfolio optimization that the CUSO has produced.
“This is not to say issuers should approve every applicant with reckless abandon,” Scott added. “Rather, card managers and their teams should take a closer look at their approval policies. By making actual conversation with an applicant into a distinct and important procedure in the application process, issuers can more easily justify non-traditional approvals.”
He also advised credit unions to take a look at what percentage of their overall loan portfolio is in credit card loans.
“In our experience, FIs with 10% of their loan volume residing in the credit card portfolio achieve the greatest success. The industry average, however, is between 5% and 7%,” Scott said.