nce upon a time in the not so distant past, I recall credit unions across the nation pondering the fates of their credit card programs. Keep? Sell? Keep? Sell? At the same time, credit unions were in the news for selling their credit card portfolios to banks?yes, the same banks that have since brought down the American economy. Oh, the justifications I used to hear: credit cards were not a core competency, the risk was too great, fraud was a concern, it's an orphan within our product line. And, yes, some credit union CEOs even said banks do cards better. The credit card remains the most misunderstood product within a credit union.
A credit card has become a universal product in American society. Virtually everyone has one, and although we are expecting a downward trend in credit card usage, the bottom line is that Americans carry billions of dollars of credit card debt. As a credit union, your members are entitled to the most fair and ethical credit card in the marketplace.
Banks don't do credit cards better. American consumers are revolting against banks for unfair and unethical credit card practices?rate increases to 29.99%, late fees to $49, annual fees of $90, balance transfer fees, inactivity fees, etc. Banks are blaming their actions on the Credit Card Act of 2009, the state of the economy and rising unemployment. Who are they trying to kid?
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Yet to be fair, many credit unions have also over reacted to the Credit Card Act of 2009. Many have been ill advised to make some changes to their credit card programs that actually may be a detriment in the long term. I think those credit unions that have switched to a variable rate on their credit card program will come to regret that decision. Just because the banks were doing it, does not make it the right thing to do. A common mistake I see is credit unions look at one singular aspect of the credit card portfolio: charge-offs have increased, we must increase rates; fee income is down, we must implement new fees.
Here's the bottom line. If your credit card program is generating an annual net income per account of at least $100 and at least 70% of card program revenue is coming from finance charge income, I can assure you that your card program is in a healthy place in terms of profitability. Many credit union actually net over $200 annual net income per account. If your credit card program is not making at least $100 in annual net income per account, there is something wrong. Don't be so quick to make your members pay for the lack of experience in managing a credit card portfolio. Two key ways to balance the net income aside from total income is portfolio performance and expense management. Remember, you are credit union, not a bank.
The credit union credit card is the little Engine that could and has made it the top of the mountain. Credit unions have an incredible opportunity ahead of them. This one product can drive up membership and overall asset growth. And, oh, by the way, the credit card just happens to be the most profitable product in a credit unions product line. I would think some increases to the bottom line for most credit unions would be very welcome about now.
Last year I created a new consumer Website (www.creditcardconnection.org). The site is a way to connect American consumers with fair and ethical credit card programs. It is not a credit union locater, but a credit card finder. The creation of this Web site was a natural extension of my passion in being the advocate for credit unions against the portfolio brokers and processors in helping credit unions realize the greatest value in their credit card programs.
Credit unions are able to be included at no fee to them. However a credit union must register for inclusion (www.cardanalysissolutions.org).Not all credit unions have programs that consumers advocates judge as fair and ethical. Therefore, credit union locators will not work in the best interest of the American consumer when looking for a credit union credit card.
As the little engine makes it to the top of the mountain, time to bring up the caboose over the edge. Credit cards have certainly proven their place in American society, why not be part of it? Your credit card program with the national exposure for credit union credit cards beginning to take hold may be one very valuable asset to your credit unions future.
Ondine Irving is the owner of Card Analysis Solutions & Credit Card Connection. She can be reached at 847-295-2051 or [email protected]
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