TAMPA, Fla. – How should credit unions best manage their credit card portfolios? As the market for credit union credit card portfolios has grown steadily hotter, more CUs have started researching how to better manage and grow their card assets. For some, better card management has meant sharply changing the way they managed their card portfolios. But for others, like the $4 billion Suncoast Schools, better card management has relied on simple ideas like coordination and research than on any "magic bullet," according to Linda Darling, CFO of the $4 billion credit union. "We didn't do anything that the big national issuers don't do," Darling said. "But we were consistent about it and we made sure that all the employees were on board." The result, Suncoast Schools saw an increase in its outstanding balances of 35% in 2003. According to NCUA data, the credit union has a card portfolio of 100,000 accounts with outstanding balances of $228 million. In terms of households, Darling said Suncoast's cards have penetrated 34% of the CU's membership. The foundation of their card program's success has been knowing their product and the role it played in their credit union, along with a willingness to accept some higher losses on their card portfolio than on other credit union products, Darling explained. "It's no secret," Darling said, "that unsecured lending is the riskiest lending we will do. But even with losses running about 1.75%, our credit cards are still the most profitable product we have, not to mention the connection they let us build with our members." Suncoast offers a wide variety of card programs, a VISA Platinum Card, VISA Platinum With Rewards, VISA Gold, VISA Classic, VISA Classic, VISA Student Classic and a VISA Secured Classic. A VISA Platinum Home Equity card rounds out the selections and there is even a VISA Classic for teens, which is meant to help teach young people about cash and credit management, with the parents' signature of course. "The point is that cards are one of the ways we really cement our relationships with our members," Darling said. "That's one reason I love our credit card and why we push it among all our members as well." Didn't Do It Alone Darling also said having a processor which was flexible enough to help the credit union develop and innovate its card program had also played a role. SunCoast processes its card transactions with First Data Corporation and is a member of the St. Petersburg, Florida cooperative PSCU Financial Services. Darling said it was at PSCU's conference in April 2003 that she got the idea for the balance transfer promotions that later proved so successful. "Our program was not bad or in trouble or anything like that," Darling said, "but we are always looking for ways we can do it better and when I attended the conference I recognized opportunities that we could use." The biggest engines in Suncoast's card effort in 2003 were a balance transfer promotion that increased outstanding balances by $27 million and a direct mail campaign. The direct mail campaign offered either credit limit increases or pre-approved card offers sent to members whose credit histories merited the increase or the card. "We were careful about how we offered both those promotions," Darling explained. "For example, we allow the balance transfer promotion rate (5.9% on Platinum transfers) to remain in place until the transferred balance is gone," she said. "We don't have a time limit on our transferred balance rates. We also don't have any of those burn fees that other issuers sometimes use. We believe we have to treat our cardholders right," she said. "Burn fees" in Darling's parlance are the fees and other practices that other credit card issuers sometimes have in place when cardholders are late with payments or miss other payments or see a dip in their credit scores. But while the credit union doesn't mimic what it considers the negative elements of nationwide card issuers, it doesn't mind copying some of their marketing methods. "The use of direct mail and pre-approvals are common from national issuers but not so common among credit unions," Darling said. "We looked at what they were doing and said why can't we do that?" The credit union timed its credit limit increase and card offer campaign to coincide with the beginning of the 2003 holiday shopping season, an approach which Darling said proved very successful. The card offering mailing had a 3% return and brought in 1,000 new card accounts, adding $12 million to the outstanding balances. But the mail programs were only the tip of the credit union's card marketing spear. Suncoast also took advantage of all the marketing channels open to it. The credit union put promotional messages on its Web site and in its newsletter and used VISA advertising in its statements. Suncoast's card staff also took up an effort to promote the card among the rest of the credit union staff so that Suncoast could implement programs in which every member who applies for a consumer loan is also automatically considered for a credit card. Every member who opens a checking account, card manager Audrey Santafemia explained, is also considered for a possible credit card. "It's a unified approach which makes the card program a familiar part of the credit union," Santafemia said. "Both for the members and the staff." Darling said she always works with other credit union executives who appear to not understand the role cards can play. "Whenever anyone calls me to talk about maybe selling their card portfolio, I try to help them see what it is they would be selling and how important and profitable product those cards could be for them." -

[email protected]