A Revitalized Card Portfolio
A new focus on credit card lending is reaping results for many credit unions. The card portfolio rose 10.8 percent during 2006, well above the 6.0 percent growth rate in revolving loans recorded nationally by the Federal Reserve. Credit union card programs are attracting members with competitive rates, lower fees, reward programs and, perhaps most importantly, transparency in program guidelines. With the GAO taking banks to task in 2006 for their confusing explanations of how credit card rates are determined, credit unions’ member-friendly programs can be differentiators in the marketplace.
Ensuring that growth is not compromising the quality of the portfolio is an important aspect of card program management. Credit unions are demonstrating that they are managing the risks well, with the credit card delinquency rate actually declining during 2006 from 1.2 to 1.1 percent.
Although there has not been much change in the percentage of members with a credit union credit card, which stood at 14.1 percent at year-end, the members who have a credit union card are using it more frequently. The average card balance rose 13.2 percent during the year to top $2,200. Members are utilizing 41.5 percent of available credit card lines at year-end, up two percentage points from year-end 2005.
With growth being realized with those members who have a card and portfolio quality remaining strong, the next step for credit unions will be to expand card usage to new members.
Affinity Cards Are a Growth Opportunity
One way to enhance card programs is through affinity relationships. MBNA, the pioneer of affinity credit card programs, reached more than 1,400 professional organizations and 600 sports-related organizations prior to its merger with Bank of America. Leveraging relationships with over 850 colleges and universities also contributed to its broad reach.
Historically, a core strength of credit unions has been rooted in affiliation with different entities. Now may be the time to learn from MBNA’s success and leverage relationships with core SEGs, sponsors, or partners. While a relatively small number of credit unions have engaged in “true” affinity partnerships, many have created formal affinity relationships and supported its natural core relationships with their fields of membership. Take a look:
Purdue Employees Federal Credit Union
PEFCU offers a rewards VISA card at 11.5% fixed interest
Local Government Federal Credit Union’ s Affinity Debit Card
LGFCU celebrates the importance of the North Carolina Firefighters with the North Carolina State Firemen's Association Debit Card. In just 18 months, it has given back $100,000.
U.S. Senate Federal Credit Union
U.S. Senate FCU reinforces its natural affiliation with U.S. Senate employees on its VISA credit card.
Maurice Smith, CEO of LGFCU, and Bob Falk, Executive Vice President of Purdue Employees FCU will discuss their affinity programs on the upcoming webinar, Growing Your Card Portfolio: The Power of Affinity.