ARLINGTON, Va. – While credit unions continue to ditch their credit card portfolios by selling them off, there are credit unions out there that are seeing very healthy returns on their card portfolios. According to NCUA data, seven credit unions across the country saw their credit card loan balances increase by at least 20% from March of 2002 to March 2003. While several of the seven reported using a variety of different approaches to achieve that end, they all agreed that credit cards are an asset a credit union can manage successfully if it sets out to do so. The seven credit unions include two of the multibillion dollar institutions; the $3.8 billion Suncoast Schools FCU based in Tampa, Florida, the $2.6 billion Vystar Credit Union in Jacksonville, but also five that, while large, are still not quite as big: the $821 million John Deere Community, based in Waterloo, Iowa; the $557 million Citadel FCU, based in Thorndale, Pennsylvania; the $676 million University of Wisconsin Credit Union, based in Madison, Wisconsin; the $603 million University FCU, based in Austin, Texas; and the $383 million Northwest Community Credit Union, based in Eugene, Oregon. "In our case, the biggest thing that made a difference in our program was empowering our front line staff to make our members pre-approved credit card offers at the moment they were dealing with them," said Joseph Pawlowski, vice president of lending for Citadel FCU. Citadel saw the greatest jump in its credit card loan balances, over 52%, over the course of the year. Pawlowski explained that the credit union periodically focuses on reviewing and improving one element of its business, and focused on credit cards in 2002. After reviewing delinquencies and getting reassured about the fundamental soundness of their cardholders, the credit union started a systematic plan of reviewing and increasing, where appropriate, its cardholders' credit limits. The credit union also added a Platinum reward card as well and took up some more familiar marketing tools like offering balance transfer offers, he said. But the key innovation, Pawlowski said, was the change the credit union made to the way it handled the credit card within the institution's product line by allowing employees to offer pre-approved cards to members who qualified, he added. "Taking that approach allowed us to integrate our credit card products into many of the other credit union products," Pawlowski added. Pawlowski said the change in card marketing meant that the credit union became much more "up front" about its cards and that the credit union had seen its card penetration increase dramatically, though he didn't have the card penetration data before and after the effort. Citadel only offers MasterCard, with a Classic, Gold and Platinum Rewards Product. Angi Fangman, marketing manager at John Deere credited a similar approach, combined with an increased emphasis on traditional marketing techniques with her institution's cards, for lifting John Deere's program by over 30% over the course of the year. John Deere cut the interest rates on its cards, she explained, and having almost all the credit union's employees able to market the cards to members in the course of the credit union's regular business made it that much more certain that the credit union's lower card interest rates got out to the members. Kent White, vice president of marketing for Northwest Community reported that his credit union's over 20% card surge had come on the heels of the credit union taking on a community charter. The credit union had previously served the forestry and lumber industries and related trades in Oregon. That meant Northwest had a large number of small select employment groups, as well as 11 branches spread across the entire state, White added. "Moving to a community charter allowed us to significantly move forward with our indirect lending," White said, "particularly with auto loans taken out at the dealership. Once someone becomes a member in the course of getting their auto loan, we follow up with card offer set to good rates," he added. Although White credited the charter change with giving Northwest the opportunity to move its card program forward, he disputed the notion that the growth would have occurred without the card marketing the credit union had done or that credit unions were somehow less capable of well managing their card programs. Don't Let Processor Limit Card Powers White said that credit unions that educate themselves on card marketing and dynamics can do a good job with the revolving loan products, but he added that a credit union needed to make sure that its card processor was as flexible as possible in order to be able to structure a card platform that will have the most appeal to its members. "You can't initiate a balance transfer program offer, with additional benefits, if your processor cannot support such a thing," he said. "I think for a lot of credit unions, the processor they use can be a limiting factor on their programs." Kathy Bonaventura, senior vice president of lending for Vystar, reported that her credit union's card portfolio balances rose over 21% over the course of the year due primarily to a balance transfer offer that the credit union had first meant to limit for nine months but which had been received so enthusiastically by its cardholders that Vystar had decided to leave it in place. Patti Barrow, vice president of marketing for Suncoast Schools, credited her institution's practice of offering credit cards tied to each credit union member's niche in life for its over 24% increase. Suncoast offers a VISA card aimed at students, a Classic card aimed at young adults, a Gold card for when members are becoming more financially established, and a Platinum and Platinum Rewards card for the time in members lives when they often begin requesting more rewards. "We really just have great card products," Barrow reported. She also credited the credit union's card management practices which, she said, the credit union had always had but might have begun emphasizing more toward the end of 2001. The two credit unions that were unavailable for this report, University of Wisconsin Credit Union and University FCU, saw increases of over 21% and 30% respectively. But while two-thirds of the credit unions in the data had portfolios that increased at least slightly, fully a third of the credit unions cited had losses which were mostly in the single digits but which ranged as high as over 22% in the case of the over $3 billion Kinecta FCU, Manhattan Beach, Calif. In an e-mail exchange Nancy Tack, Vice President for Communications for Kinecta said that the credit union was not seeking to sell its portfolio, but that the decline had gotten attention from the institution's leadership. "Kinecta Federal Credit Union has taken a conservative approach to its credit card program over the past couple of years," she wrote. "With the recent restructuring of its Lending Department, the credit union is taking an aggressive approach to strengthening and building its credit card portfolio. There are no plans to sell the portfolio." Willie Koo, CEO of Asset Exchange, the noted broker of credit union credit card portfolios based in Portland, Oregon, reported that several of the credit unions on the list had approached the firm about the possibility of selling their card portfolio, but he declined to say which ones. [email protected]

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