Card portfolio analysts working for Card Services for CreditUnions say that, on average, roughly 15% of a credit union'smembers carry the credit union's credit card, leaving most creditunions with plenty of room to grow their programs further.

“Return on assets, fee income, interest income and overallprofitability are all higher for credit unions that have a creditcard program, compared to those that do not,” said Bill Lehman,vice president of portfolio consulting services forCSCU. “Credit cards are a very effective way to improve theloan/share ratio.”

Tampa, Fla.-based CSCU is an association of credit unions whichprocess payments with FIS.

Lehman's remarks appeared in a research paper the associationreleased titled “A Credit Card Program Can Be a Credit Union'sHighest-Earning Asset” in which Lehman laid out how much a strongcard program can benefit a credit union.

For example, a 40,000-member credit union might have 3,600 credit card accounts (9% penetration) with 1,980 of those accountsactive (55% activation) with an average balance of $1,500 and 5.5transactions per month.

A portfolio with these performance attributes could generate inexcess of $400,000 in annual revenue (finance charges, interchangeand fees) Lehman observed. If the credit union increasedpenetration to 13.5%, average balances to $2,000 and activation to60%, along with utilization to seven transactions a month, thisportfolio generates an incremental $330,000 additional in totalrevenue for the credit union, he argued.

If this is so, why aren't more credit unions improving theircard programs?

The paper offers several reasons, among them the fact that somecredit unions have boards of directors with a culture that leavesthem uncomfortable promoting card programs or use.

“Some credit unions have difficulty getting upper management tobuy into a credit card program,” said Michael R. Chenderlin, asenior portfolio consultant for CSCU. “Often this is because there isn't a fullunderstanding of the benefits of credit cards and how they helpcreate a stronger offering across all products to deepenrelationships and drive profitability.”

Chenderlin added, “Two of my credit union clients are in thesame city, five miles apart. “One instantly issues a credit cardand debit card when an account is opened; members can imprint thecards with photos of their kids or the family dog. This creditunion has a 51% penetration rate. The second credit union has atotally different mindset and doesn't take full advantage of whattheir program can offer—here the result is a penetration rate of8%.”