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Credit unions that issue credit cards may soon be coming upon some tough times in terms of reduced profitability of their star performing product. The national media is communicating how consumer spending is down by double digits, and we are in for a much slower holiday spending season. Mainstream industry experts on the likes of CNN, MSNBC, Fox and CNBC are encouraging consumers to hang on to their money and cut erroneous spending. The message being sent to consumers is maintain humility, cut back and check your ego at the door. You can no longer afford to keep up with the Jones!

How do these messages translate for credit unions and their credit card programs? Reduced interchange income. Typically interchange income represents 15%-25% of a credit card portfolio’s revenue, with the higher interchange representative of those with reward programs. If consumer spending is down, resulting in reduction of interchange income, what’s left to maintain profitability? Finance charge and fee income. For credit unions, finance charge income typically represents 65%-70% of a credit card program’s revenue and fee income the remaining 10%-15%.

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