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July 30, 2012
I'd love to know over what time period this data was analyzed. If you went back at least a few years, I think you come to a different conclusion. These portfolios look good right now, but many looked really, really bad a couple of years ago. Does Callahans have a pony in this race to promote? They should be more objective.
Credit card lending is different than auto or mortgage lending, but if adequate effort is given to the process it can be very lucrative for issuers. Comment #2 is spot on.
Some CUs sold their portfolios to make a quick buck on the premium and divest themselves of some work, and perhaps a little risk.
As to the question of whether CU issuers are equipped to handle the fraud risk, the same could be said of debit cards. And considering that next year merchants will be able to accommodate EMV cards, we should be in a far better position to guard against fraud.
While the charts look interesting for a 4th grade class, I would expect a little more in-depth statistical rigor from Callahan. What is really important is the distribution around those averages (or more appropriately the means). Are the differences in the 2 populations really meaningful or are they the result of statistical error? What is the degree of confidence?
If you don’t want to lose the reader into the technicalities of your statistical analysis, at least mention that you did go through it…Otherwise, your conclusions are as meaningless.
Your are right that CC portfolios are among the highest yielding loans. But when you closely examine, what used to be the cost of funds for your paid in fulls each month... along with your real overhead, bonus points, insurance, bankruptcy and chargeoffs as well as fraud, that yield suddenly comes into a totally new perspective... and I'd bet a net loss for many too!
Also how many credit unions are really equipped to handle the fallout and costs from a major fraud event?
Until our country gets its act together security wise... we're the only country in the world that still has the mag stripe authorization process... it's really a joke compromise wise... I don't want to ever face coming on a Monday morning with 500 members with fraud reports to wade through.
It would appear that many credit unions are awash in liquidity, eroding their NW positions. Exactly what is that buying them?
Or, why would you continue to bring money in that you aren't, or can't loan out?
Are credit cards the answer, an answer, but I don't think the right answer.
Gerd Henjes, Pres./CEO
I'd imagine it is because credit card portfolios are among the highest yielding loan asset a credit union can have on the books. When underwritten well, they are extremely attractive (especially in this low rate environment).
Why do you think someone wanted to buy your portfolio in the first place? Why are most credit unions that previously sold getting back into this business?
By and large, we (and most credit unions) don't need the cash from a sale nearly as much as we need a productive outlet for liquidity. Credit cards are a great way to show members competitive value (better rate than most major issuers) and return strong value to the co-op.
Hope this helps.
Guess I didn't know what I was missing since we sold our credit card portfolio in 2001!
I would say my credit union's numbers without credit cards, have greatly exceed our peers with credit cards.
I'd be interested in knowing why you seem to see it the other way around.
Gerd Henjes, Pres./CEO Countryside FCU
Which credit union leads in income per e...
Industry Performance By The Numbers (3Q ...
2014 Year-End Leaders In Credit Card Gro...
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