As Major Credit Card Issuers Face Questions, Credit Union Opportunities Emerge

Double-digit growth in the credit union credit card portfolio is well ahead of banks’ results for 2006. Given recent headlines, consumers may be looking at more than just rates when choosing a card.


Last week Wesley Wannemacher was introduced to the nation by way of a Senate hearing that focused on credit card industry practices.  Over six years, Mr. Wannemacher’s credit card debt was tripled due to interest charges and fees.  The numbers behind his story are:

  • $3,200 in card purchases
  • $4,900 in interest charges
  • $1,500 in 47 over-limit fee charges (although he went over his credit limit only 3 times)
  • $1,100 in late fees
  • $10,700 in total charges
  • $6,300 in total payments by Mr. Wannemacher
  • $4,400 remaining balance after six years

While Mr. Wannemacher’s story is stunning, it is one that many Americans could likely relate to.  USA Today and BusinessWeek,among others, have published stories within the past six months on consumers struggling with credit card debt.  Last week’s Senate hearing followed a January hearing in which Senate Banking Committee Chairman Christopher Dodd portrayed many card issuers’ policies as predatory.   Last fall, a GAO report took banks to task for their confusing explanations of how credit card rates are determined.

With credit card industry practices in the spotlight, the major issuers are scrambling to respond.  Chase, the issuer of Mr. Wannemacher’s credit card, and Citi both announced changes to their practices last week:

  • Chase announced it will no longer charge over-limit fees to customers who have been in a chronic over-limit position for 90 days
  • Citi announced it was eliminating both the “universal default” policy, which raised rates for customers who were late in paying other creditors, and its “any time for any reason” policy, which allowed it to raise rates at its discretion

The Credit Union Difference Becomes More Apparent
The practices of these major issuers can stand in contrast to the straightforward practices of many credit union credit card programs.  As members begin to compare and contrast card offerings, credit unions are seeing new momentum in their portfolio.  Credit unions’ credit card portfolio rose 10.8 percent during 2006 to reach $27.2 billion.  While credit union card outstandings represent only a 3 percent share of the market, the growth trend is quite different from the negative 2.6 percent card portfolio growth rate posted by FDIC-insured institutions over the past 12 months.

While a new focus on credit card lending programs is a significant factor in many credit unions’ success, transparency in program guidelines may also be becoming a differentiator.  Credit unions are demonstrating that they can grow their portfolio with responsible lending practices, as their credit card delinquency rate actually declined during 2006 from 1.2 to 1.1 percent.  By comparison, banks’ card portfolio delinquency rate is 2.1 percent, up 13 basis points from December 2005.

The driver of credit union card growth in 2006 was existing members who used their credit union card more frequently.  The average card balance rose 13.2 percent during the year to top $2,200 and member utilization of available credit card lines rose two percentage points from year-end 2005 to 41.5 percent.

The next step for credit unions will be to expand card usage to new members. With headlines leading consumers to re-examine their credit card options, credit unions have an opportunity to make their difference – transparent rates and fees that don’t ‘trap’ members - a competitive advantage.




March 12, 2007


  • I think that a major driving factor in existing member visa balance growth is due to the slow down in the equity appreciation in the housing market. As consumers become tapped out in their equity ATM cards they are turning back to traditional consumer credit options.
  • All of the recent bad press seems to be focused on Visa. This may also represent the need to diversify risk by diversifying card brands and consider issuing on the Discover Network.
  • What if we banded together to create a mass media campaign around Your Credit Union''s Credit Card. Credit unions can''t compete dollar for dollar in advertising, but we can cooperatively promote the credit union brand especially in products where, hands down, we provide better value for the members.
  • This is encouraging news. Transparency is the key to credit union branding and will become an even stronger component of the credit union brand in this decade.
  • I thought Jay''s article was excellent and exposed the banker''s credit card operations for what they truly are - predatory lenders or will if any consumer gives them the slightest opening. I think he points out a way CU''s can gain a real competitive edge and build on the trust with their members.
    Merrill Mann