ALEXANDRIA, Va. -- The latest data from NCUA indicates thatcredit union card portfolios have continued growing and analystsand CU executives credited better management and a strugglingeconomy for the ongoing trend.

Credit union credit card portfolios worth more than $1 millionin assets grew by 14% between June 2007 and June 2008, according toanalysis performed by Asset Exchange.

The CU card brokerage and consultancy owned by Fidelity NationalInformation Services reported that NCUA data showed that CU cardassets grew at about twice the rate of other CU assets over thesame period and that the number of cards issued by CUs grew by3%.

The number of card portfolios that grew faster than the rate ofinflation moved from 71% in June 2007 to 76% this June.Card-related assets as a percentage of overall CU assets alsocontinued to increase, moving from 4.49% in the second quarter of2007 to 4.80% in this year's second quarter.

The brokerage also reported that the pace of CU portfolio saleshas dropped to a crawl. Only five credit unions sold their cardportfolios, worth a collective $20 million, in the second quarterof 2008 versus 21 selling their card portfolios worth $132 millionin aggregate in the second quarter 2007.

No one from Asset Exchange was available to comment on the veryslow market for CU card portfolios.

But Tim Kolk, a partner at Brookwood Capital, another CU cardportfolio brokerage and consultancy, acknowledged that hisPeterborough, N.H., firm had seen card portfolio sales drop butthat there had been an increase in other CU card-related work.

"[The CU card portfolio market] is certainly a lot slower thanit was, but we are seeing demand for our consulting work growing,so the main purpose is being met: credit unions are engaging intheir card programs," Kolk said. "However, most of our currentengagements have less to do with growth and are much more focusedon risk management."

Credit union card performance has been rising since mid- to late2006 but had never before posted double-digit progress, somethingcard processors attributed at least in part to better CU cardmanagement.

Card Services for Credit Unions has had a long campaign to helpits members improve their card management practices and was quickto see how better management has been helping drive the growth.

"During a tough economy, many cardholders are recognizing thattheir credit union tends to offer more favorable rates than the bigbanks on most products, including credit cards," said CSCUSpokesman Cassie Ricks. "And as some banks are facing increasedpressure due to the mortgage crunch, many credit unions are in abetter position to serve their members with competitive APRs andlower fees."

Mark Fenner, National Sales Manager for TNB Card Services, thepayment processing arm of credit union-owned Town North Bank,largely agreed and noted that more credit unions have become awareof how valuable credit cards have become to their members.

"Americans love electronic payments, and credit unions havewoken up to the fact that credit cards are an asset that is part ofa growing industry," Fenner observed. Fenner noted that with theeconomy struggling the way it is, some credit unions that mighthave not given many resources to cards in the past might haverediscovered their card programs as opportunities when compared torelatively moribund mortgage and auto loan markets.

Credit unions with balance transfer promotions in place or inthe pipeline may be best positioned to benefit from the currenteconomic trends, already offering lower credit card interest ratesjust when CU members may be actively looking.

"I think that our credit unions have always had competitivelypriced cards," observed a credit union league staff member whodeclined to be named because she was not authorize to speak to thepress. "But in past years, their members might have had to lookharder for them. We have really worked hard with our credit unionsto help them highlight their cards for their members."

For example, TNB reported that credit unions participating inthe balance transfer promotion saw an overall 3.8 % response rate.About 40 of its client credit unions participated in the promotion,some offering balance transfers at a lower interest rate for alimited time or the life of the balance.

TNB reported that credit unions offering the lower interestrates for the life of the transferred balance saw the strongestresponse, bringing in an average balance transfer of $3,590. Thatwas $895 more than balance transfers where TNB credit unionsoffered the lower balance transfer rate for a more limited time,the card processor reported.

Shell Federal Credit Union, in Deer Park, Texas, was one of thestars of the promotion. TNB reported that Deer Park had increasedits card balances by $500,000 so far, halfway to its goal ofincreasing its overall card portfolio balance by $1 million.

The $284 million credit union averaged $3,383 per transfer checkand a 4.0% response rate, representing a 58% increase in responsesover its previous LOB rate offer in early 2007, TNB reported.

"The balance transfer promotion and LOB rate were strategicrecommendations TNB made in 2007 when we revamped our portfolio,which has paid off handsomely for us," said Sharon Hicks, creditcard services manager for Shell. "This is the second time we'veoffered a balance transfer rate for a balance transfer promotion.Together the two balance transfer rate offers increased ourbalances to $8.8 million."

Hicks added, "For a modest investment in the promotion, weachieved an incredible rate of return, plus we gave our membersanother reason to count on us to provide them with products andservices that they need."

TexasOne Community Credit Union of Houston achieved a remarkable5.97% response rate with its LOB rate offer. With an averagetransfer of $3,694, the credit union brought in more than $380,000in new card balances.

"We achieved a 34% increase in the amount transferred with thelife of balance offer rate compared with the last balance transferpromotion we offered," said Helen Blaylock, senior vice presidentof card services for TexasOne Community Credit Union. "The life ofthe balance rate enabled us to give our members a much-neededfinancial break, which is evident in the favorable response wereceived from the offer."

Balance transfers were also a part of the approach that the $52million DOT Federal Credit Union, headquartered in Poughkeepsie,N.Y., adopted under the advice of their processor, PSCU FinancialServices.

Prior to 2006, the only marketing activity the credit unionoffered was mailing convenience checks with the plastic. But PSCUsuggested they offer credit line increases, balance transfers,account activation and account acquisition promotions. In just twoyears, PSCU and the credit union reported that average balances up17% and the credit union's return on investment sat at arespectable 4.29%.

"Working with the PSCU's portfolio consultants was aneye-opener," said Marketing Coordinator Melissa Troiano. "We werepleasantly surprised to learn how successful our marketing effortswere in increasing balances. Now, armed with their in-depthevaluation of our portfolio and recommendations, we are makingstrategic decisions that will both grow our membership and helpensure a healthy balance sheet."

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