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<p>ARLINGTON, Va. – What used to be viewed as a controversial move, might become commonplace based on what credit unions that have sold their card portfolios are reporting. Three credit unions that sold their credit card portfolios between a year and two years ago report their members having a greater variety of cards and the credit union having more peace of mind about the cards offered members. Recently Credit Union Times reported on two credit unions that decided not to sell their card portfolios between a year and two years ago and instead got advice from Florida-based Card Services for Credit Unions and Certegy on how to manage their portfolios more effectively. The experiences of the $224 million Park FCU, the $1.1 billion Teachers Credit Union and the $121 million Sierra Schools Credit Union reflect the experiences of credit unions that have sold their portfolios. “We decided to sell after we concluded that our credit card was a commodity, and had very little to do with our relationship,” said Rick Rice, CEO of South Bend, Indiana based Teachers Credit Union. Teachers sold its $62 million portfolio in August 2000. Rice said the credit union had concluded that its card was a commodity and not a “relationship builder” after it became clear that many of its members carried more than the credit union’s card and did not feel any special connection to the credit union because of the card. He contrasted the sold credit cards with Teachers’ debit card, which he described as a “relationship product” because its linkage to the members’ share draft account made it more likely that a member would not have other debit cards in their wallet. Accordingly, Teachers offers its members a .5% rebate for the use of their check cards, providing they make at least $6,000 in transactions each year. The rebate is limited to $500 but can be doubled if the member wants to use the money towards another Teachers’ product like a car loan or mortgage. “We use the debit card to help introduce our other products to our members,” Rice said. Rice added that after the credit union had concluded that the cards were more commodities than anything else, the decision to sell became easier to make. The credit cards represented 14% of the credit union’s lending portfolio, but were 45% of its charge-offs, Rice said. “It became clear that the more efficient thing we could do was sell,” he said. One thing that the credit union did not sell was its Platinum Visa program where the cards are secured by home equity lines, Rice said, in an arrangement InfiCorp’s Keith Floen, managing director of business development, called “unusual but not a problem. “We bought the credit union’s portfolio of unsecured credit card debt,” he said. Since the sale, Rice said he rarely thinks about the cards. Significantly he said Teachers’ members have not experienced any of the negative side effects from the sale that are sometimes feared. Members have not had their interest rates summarily raised or limits lowered and the credit union hasn’t heard any complaints from members about the ways the cards have been administered. Now TCU members are able to have Classic, Gold and Platinum Visa cards whereas before the credit union had only offered the Classic card, he said. The Louisville Kentucky based Park Federal Credit Union reported similar results. It sold its $9 million credit card portfolio in February 2001. Like Teachers, Park had previously only offered the Classic and Gold Visa cards and, like Teachers, selling to InfiCorp has meant the credit union’s members now have access to Visa Platinum. Also like Teachers, Park members have had few problems with the new credit card provider, according to David Eib, Park’s vice president of lending. Although he did admit that some members, for a variety of reasons, had decided not to make the switch to the new credit card issuer, Eib says overall the process of switching over has been very smooth. Although it had offered (and offers) a MasterCard debit card, the credit union’s credit cards were Visa, an arrangement Inficorp has maintained in order to avoid confusing credit union members by offering MasterCard credit cards while the credit union offered a MasterCard debit card, according to Floen. Unlike Teachers, Park has not particularly emphasized the marketing of its debit card, Eib said. Richard Van Duzen, CEO of Reno, Nev.-based Sierra Schools Credit Union reported that Teachers had sought other avenues to restore the credit union’s troubled $6.6 million Visa portfolio but had not gotten any help from any of the credit union credit card firms. “They essentially said we are too small,” he reported later, though he admitted that he could not remember which CU firm he spoke with. For its part, CSCU emphasized that they have credit unions with accounts of as few as 200 cards and that they would never tell a credit union that it was too small for help. CSCU president Bob Hackney estimated that the problem, if there had been one, may have had to do with the processor Sierra Schools used at the time. In order to really get analytical and marketing help from CSCU efficiently, a credit union needs to use Certegy as a processor, Hackney said. “But we help credit unions of all sizes,” Hackney said. Van Duzen confirmed that, at the time, the credit union had a contract with another processor that would have been prohibitively expensive to break, even though the other processor had nothing to offer the credit union by way of analysis or advice. “They really didn’t have anything to show us and we weren’t having much luck getting help from credit union-based organizations,” Van Duzen said, “so that helped make the sale more attractive.” At the time Sierra Schools offered only a “plain vanilla” Classic Visa card, Van Duzen said, and had only begun to investigate trying to add a Gold card. Like the other credit unions, Van Duzer reported that the experience had been a good one and that Sierra School’s members now had access to a greater variety of cards that are offered at risk based interest rates, he said. “Our members’ interest rates did change after we sold the portfolio,’ he said. “Many of them went down,” and he had not heard or any that had gone up. [email protected]</p>

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