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
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%.