UPPER MARLBORO, Md. — The $900 million NASA Federal Credit Union has discovered, as have other credit unions, ways to improve what had been a moribund credit card program into a higher performing asset.
The credit union has about 67,000 members and Vice President Erin Hamilton reported that roughly 23,000 of them have and use one of the credit union's five card products. This gives NASA a penetration rate for its cards of roughly 34%, higher than the industry average, but Hamilton reported that the card program had begun to stagnate.
Hamilton explained that, for example, the CU had fallen into only one card promotion a year, leaving opportunities for member service and additional income on the table. In addition, the CU, which processes transactions through PSCU Financial Services, had not done many rewards promotions.
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"We put into place promotions that PSCU had in place to offer our members double rewards points during times of the year when there tends to be card activity," Hamilton said. She said the CU had even improved its card designs to make them more attractive and better reflect the credit union's association with the space programs.
The effort paid off as the CU has seen it receivable card balances increase by 8% in 2005, 27.6% in 2006 and 21.6% in 2007. At the same time, the CU saw delinquencies drop from 1.41% in 2003 to 0.52% in 2005, though the number rose to 1.70% in 2007, a factor Hamilton laid at the feet of the current economic downturn.
NASA also hired CU card consultant Ondine Irving and learned what other credit unions have also learned, that selling the card portfolio more actively is only one part of the equation. The other part is managing the portfolio differently.
As part of that effort Hamilton reported that NASA followed Irving's advice and began assessing late fees on its card payments at five days instead of at the end of the next billing cycle. "We realized that while we could still have our late fee be competitive, what we had been doing wasn't really fair to all of our other members who were not late," she said.
NASA also purged nonperforming or closed accounts from its roles, saving more money, made other small changes, which while small, had a big impact on the bottom line of the entire portfolio.
"The growth of NASA's credit card portfolio since 2005 is a perfect example of how a credit union can have success with credit cards when the commitment is made to grow and actively manage the program," Irving said, adding that more credit union card issuers have learned that previous card portfolio management strategies need to change.
"In a time when many credit unions simply have ownership of the credit card program float aimlessly throughout the credit union, Erin Hamilton and NASA have shown what determination and passion for a credit union product can do for the card program. To have a 49% increase in cards outstanding in a two-year time frame is phenomenal, while delinquencies and chargesoffs have remained very well managed."
For her part, Hamilton attributed the growth in the program a bit to the fact that it is a credit union offering the cards and that the card products they offer provide members with a better, more trusted, product with lower rates than banks offer.
"I came to this job from working at cards on the banking side," Hamilton explained. "I feel so fortunate to have made it here where I can really help a cardholder with a problem in a way they would be unlikely to be helped at a bank."
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