ARLINGTON, Va. – When a bank purchases a credit union cardportfolio it frequently reviews the credit card accounts of currentcardholders with an eye toward increasing the card limits. This isbecause credit unions, in general, are known for having cardportfolios that are not being used to their potential. PSCUFinancial Services hope it can get credit unions thinking aboutadjusting members' limits. It's no great secret that credit unionsare very cautious about underwriting generally and credit cardloans in particular, said Brian Crawford, Chief Marketing Officerfor PSCU Financial Services. PSCU is the firm based in St.Petersburg, Florida, that serves more than 500 credit unions thatprocess their card transactions with Denver-based First DataResources. “It may be that many credit unions' caution about theircredit card limits may be hampering their portfolio growth,” headded. The tight fist that some credit unions keep on theircardholders' credit lines is a problem, Crawford and other industryexecutives argue, because the practice effectively prevents thecredit union's card from winning the coveted “top of the wallet,”status. Top of the wallet cards are those the cardholder will reachfor first when making a card purchase, whether because of thecards' interest rate, rewards program or availability of credit,the so-called “open-to-buy” in industry parlance. A credit unioncard could have a great interest rate, a decent rewards program anda measure of credit union member loyalty, but all that will come tonothing if the credit union member thinks the card's limit has beenreached. The problem is made worse, Crawford explained, because ofsome credit unions' misapprehensions of cardholder behavior. “Somecredit unions still believe that cardholders will stop reaching fora card when they reach their limit,” Crawford said. “But researchhas shown that most cardholders will stop reaching for their cardwhen they have reached 75% of their limit, because nobody wants toface the embarrassment of a purchase decline.” To begin to counterthis problem, PSCU launched a program called Credit Limit IncreaseSolution in July of last year. The program seeks not so much toconvince credit unions to change their underwriting criteria,Crawford explained, as much as to streamline the process creditunion cardholders have to go through in order to increase the limitof their cards. “We use the underwriting criteria the credit uniongives us,” Crawford said. “If the credit union wants to limitincreases to those cardholders who have never had a late payment,that is the criteria we will use. If they choose to limit creditincreases to cardholders that have gone eight months without a latepayment, that's the criteria we will use. It's up to the creditunion.” But by joining the PSCU program, Crawford said, creditunions can proactively reach out their members about their creditlimits, rather than wait for the member to use the customarychannels, which can include filling out forms, interviews with loanofficers and taking too much time. In the Card Limit Solution, aparticipating credit union's cardholder calls PSCU's call centerfor some aspect of card service and the PSCU computer, at thatpoint, checks the cardholder's account for whether the cardholderis eligible for a limit increase based on the criteria the creditunion has previously set. If the cardholder does qualify, the cardcenter operator tells the cardholder they are eligible and then, ifthey accept, the limit increase happens immediately. “Thecardholder is able to put down the phone or get up from thecomputer and go use the additional buying power immediately,”Crawford said. Crawford cited the computer option because PSCU hasbegun to offer a computerized version of the program, where acardholder who visits their account online can be offered a creditlimit increase through a pop-up window on their machine. Crawfordsaid that while just over 21% of credit union cardholders acceptthe credit limit increase over the phone, more than 70% do so whenthe offer is made online. Crawford estimated that cardholders onthe phone may fear being involved in a long process to get theincrease where, on the computer, cardholders may feel more or lessassured that the offer was complete. Crawford reported that in theyear since it began the program has signed up 31 credit unions andthat 21 of those have opted to offer the program online as well.Crawford said PSCU was pleased with the way the program hasdeveloped and anticipated that it would draw more credit unionsonce they understood that the program used their own underwritingcriteria and that every $1,000 of credit limit increase translatedinto a 13% increase in loan balances. The $427 million Fort BlissFCU, based in El Paso, Texas, has been part of the program sinceits inception last year and reported being very pleased with itoverall. “We have seen our open-to-buy increase across theportfolio by about $1.5 million,” said Julie Tibke, Card ServicesSupervisor for Fort Bliss. Fort Bliss has about 13,000 credit cardholders and offers both Visa and MasterCard products. “Previouslyour members who wanted to increase their card limits had to applyto do so,” Tibke explained, “they had to seek out a loan officerand fill out a form and go through the credit check. Now they canbe offered the increase over the phone,” she added. Roughly a thirdof Fort Bliss' cardholders who have been offered the increase overthe phone have accepted it, Tibke reported, and added that theacceptance has been fairly uniform across the credit union's cardproducts, which surprised the credit union's leadership that hadanticipated the program would be more popular among classiccardholders. “We have also been pleased that the increase in theopen-to-buy has been consistent over time,” Tibke said. “Weinitially expected there would be a spike when we put the programinto place, and to some extent there was. But the limit increaseshave continued at the rate of over $100,000 per month over thecourse of the year,” she added. Fort Bliss had been pleased enoughwith its participation in the phone program that it plans to signup for the online program as well, she said. The program isimportant in the overall credit union card picture, Crawfordexplained, because it can help credit unions overcome their singlebiggest hurdle in the search for increased card revenue. “If youlook at the Capital Ones and MBNA's,” he said, “their focus is ongiving the cardholder the room they need to use their cards to meettheir needs. By contrast too many credit unions focus on minimizingtheir risk from card losses.” Streamlining the process, Crawfordsaid, can help credit unions more effectively manage their cardportfolios to greater profit. [email protected]

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