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Aggregate credit card balances outstanding at credit unions rose 8.9% year-over-year and reached a record high of $55.2 billion at the end of the third quarter of 2017. Average balances increased $102 annually to $2,844.
As of Sept. 30, 2017, credit cards made up 5.8% of the credit union loan portfolio. This is in line with their share last quarter. The percentage of members holding a credit card with a credit union was up 16 basis points annually to 17.4%.
Despite the increase in loan balances, credit card utilization fell slightly, 15 basis points, year-over-year. This decrease is the result of unfunded commitments expanding at a faster rate — 9.6% — than credit card balances — 8.9%.
Credit card delinquency rose to 1.23%. That’s a 15-basis-point increase over second quarter and a 19-basis-point increase over third quarter 2016. It is not unusual for delinquency rates to rise in the third and fourth quarters of the year as the dollar amount of past due accounts grows throughout the year.
However, this marks the 13th consecutive quarter of annual increases that started in the third quarter of 2014. As credit card delinquency rates have climbed, so, too, have net charge-offs. Net charge-offs were up 36 basis points annually to 2.52% as of Sept. 30, 2017. After peaking at 4.55% during the height of the financial crisis, credit card net charge-offs fell to a low of 1.87% in third quarter 2014.
Click the graphs below to enlarge and then continue reading to learn need-to-know information for launching credit card rewards programs.
As of Sept. 30, 2017, credit card delinquency for the industry was up 19 basis points from the third quarter of 2016. This was a continuation of a recent upward trend.
NAVY FEDERAL CREDIT UNION
The credit card program at Navy Federal Credit Union is a key element in the well-rounded product suite the cooperative uses to deepen member relationships.
“It’s about creating a relationship to return value that makes members want to do more business with us,” says Matt Freeman, head of card products at the world’s largest credit union.
As of Sept. 30, Navy Federal had $13.9 billion in credit card balances on its books. Of its five credit cards, four have a rewards component, says Freeman, and 80% of Navy’s card balances are tied to one of those rewards cards.
At the top end is the Flagship Rewards card. It carries a $49 annual fee, and members earn two points per dollar on each purchase redeemable for cash, travel, gift cards, or merchandise. When redeemed for travel, points are worth 1%.
Then there is the GO REWARDS points card, which earns three points at restaurants, two on gas, and one everywhere else. The cashRewards card earns 1.5% cashback on all purchases, and its nRewards Secured earns one point per dollar redeemable for gift cards and merchandise.
Navy Federal is a large operation, but Freeman says certain practices apply to any credit union.
First, understand where members are spending their money and make sure the incentives provide value. Survey members, he suggests, and find out what they are interested in.
“As you design the rewards program, don’t get too far away from what’s important to most credit union members, like low fees and rates,” Freeman adds. “You cannot compete on rewards alone.”
Read The Whole Story
Credit unions have made significant gains since the Great Recession started 10 years ago. Third quarter credit union growth trends surged past that of community banks and the overall banking industry. Measures such as loans, shares, capital, and membership have all reached new levels. These gains are all notable and meaningful; however, they are backward-looking. The important question to ask is: Where will credit unions be in the next 10 years? In this issue of Strategy & Performance, learn why now is the time for credit unions to challenge themselves.
RETURN TO INDUSTRY PERFORMANCE BY THE NUMBERS 3Q 2017