FORT LAUDERDALE, Fla. — Credit union card issuers need to stop being afraid of using risk based pricing in their card programs, according to a CU card consultant.
Ed Jesionowski, card consultant with the Michigan CU League, urged card executives attending a breakout session at the Card Services for Credit Unions conference to get over their fears of using risk based pricing.
"I have never understood why credit union keep charging their A paper the same interest rates that they do their C paper in their card programs when they don't do that for their other loans," Jesionowski said. "The fact is, that even at your higher rates the likelihood is your C paper will not qualify at that rate with anybody else," he added.
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Jesionowski explained that the most profitable card programs balance risk based pricing with rewards programs that drive usage and boost average balances. "I will be up front and say I am a complete fan of rewards programs," he added. "Keep giving away these points at all costs."
Jesionowski pointed out that at a cost of just about 1 penny per point and breakage rate that averages 70% nationwide, the points can make the card program a cross selling vehicle across the credit union's entire line of products and services.
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