Credit Card Loan Risk Management Effective Amid Declining Member Usage

Credit unions continue to do an excellent job managing the risk of their credit card portfolios -- one bright spot in an increasingly competitive business.While credit cards typically provide the highest yield of any loan product in a credit union's portfolio, the risks in providing these unsecured loans must be managed carefully. In the midst of growing unemployment and record consumer debt levels, credit unions have been doing a good job of managing the risk in their credit card portfolios. Credit union results show that while these loans do have higher risk characteristics than other loan products, credit union risk management has resulted in better results than the market average.

 
 

While credit cards typically provide the highest yield of any loan product in a credit union's portfolio, the risks in providing these unsecured loans must be managed carefully. In the midst of growing unemployment and record consumer debt levels, credit unions have been doing a good job of managing the risk in their credit card portfolios. Credit union results show that while these loans do have higher risk characteristics than other loan products, credit union risk management has resulted in better results than the market average.

The chart below shows two key loan quality measures for the credit union credit card portfolio as of year-end for the past five years, as well as first quarter 2003. Delinquency has shown a declining trend over the past year, and remains below earlier years' levels. Charge-offs have been rising over the past few years, and annualized first quarter results indicate that 2003 began at a pace that would exceed recent annual charge-off levels. However, the charge-off levels remain well below the card industry average of 6.3%.

 

 

 

Aug. 4, 2003


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