Cards CU Affinity Skills
An annual report prepared for Congress by the Consumer Financial Protection Bureau and released last month documented that credit unions have continued to sharpen their skills when it comes to managing and growing affinity card programs with colleges and universities.
Affinity card programs are so named because the credit union card issuers enters into an agreement with a school or the school’s alumni group and then markets and issues credit cards to the school or alumni community. The credit union generally gets to keep the finance charges that the cards generate but often divides the interchange with the its affinity partner and often pays a per card account fee to the school when new accounts are opened. In addition, the affinity partner also gets a card or cards bearing its logo or other team identifier that helps them build loyalty with the program.
The report, which was mandated by the CARD Act of 2009, documented that three credit unions were among the national leaders in opening new credit card accounts with college or university affinity partners in 2011. The report was formerly compiled by the Federal Reserve.
The leader among both credit union and noncredit union affinity card issuers was the 43,000- member $276 million University of Illinois Employees Credit Union, which opened 3,452 new card accounts in its affinity program with the University of Illinois Alumni Association in 2011. The credit union had opened 779 new accounts under the agreement in 2010, when it was ranked fifth in the nation in opening new accounts under affinity deals with colleges.
The 62,000-member $746 million Purdue Federal Credit Union held the spot currently occupied by UIECU last year but fell to third this year, opening 2,877 accounts under its affinity agreement with the Purdue Alumni Association. Last year, PFCU opened 2,642 card account under the deal.
Michigan State University Federal Credit Union came in fifth on the list, opening 1,115 new card accounts under its contract with Michigan State University. Last year. it was ranked 24th and opened 302 accounts, the report said.
Greg Anderson, chief operating officer at University of Illinois Employees Credit Union, credited a variety of different approaches for the portfolio’s growth, both in 2011 and this year. As of the last report, the credit union had 7,300 card accounts in its affinity portfolio with about $20.3 million in outstanding balances.
The credit union’s success with the program was especially significant, Anderson explained, when you consider that the credit union does not offer or market the program to students at the school–though it does not deny issuing them a card.
“Essentially, if one of them comes into our branch and sees a sign about the card and if he or she qualifies, yes, we will issue them one,” Anderson said. “But we don’t go looking for them.”
Anderson explained the credit union decided to forgo offering card to students since the program had never particularly focused on student lending, even when a bank had been the affinity partner. In addition, the credit union preferred to focus on building a relationship with students and then offering them a card soon after graduation when they usually had the need for one along with greater maturity.
Anderson said the credit union’s advertising played a big role in marketing the card, as well as using local alumni groups. He said the credit union contacted the groups and asked them to market the cards among members in exchange for a fee whenever a member opened an account. “Since the local groups are almost always in some kind of fund raising mode and they like the opportunity,” he said.