How To Succeed In Credit Cards

Luck only lasts so long. That's why every credit union needs a long-term roadmap for this crucial area of its business.


Credit unions across the country are struggling to find quality loan volume that generates a reasonable yield. When properly pursued, the credit card and payments market provides abundant opportunities for almost any issuer, regardless of size.

For example:

  • Over the past five years, credit unions grew their credit card market share by 50% while bank share shrunk. Contrary to popular perceptions, the recession years were beneficial for credit union card programs.
  • Credit card interest rates have not declined from pre-recession levels. Other loan product yields, however, are down by up to 50%. Never before have credit cards provided a more attractive revenue opportunity compared to other products.
  • Credit risk and charge-off rates are at their lowest point in more than 20 years. Large bank issuers are marketing and improving their own products, but credit unions can also look deeper and provide more cards to more members than ever before.
  • Margin and ROA are at historic highs and a well-performing card program can often generate three to four times more income dollar-for-dollar than other loan products. In other words, credit card program profitability can play a major role in overall financial performance even if the program occupies only a modest place on the balance sheet.

It is important for credit unions to take advantage of these fortunate tides before conditions change. Banks recognize the attractive opportunity and have returned to the market in force after taking a break from aggressive new account marketing during the recession. With the largest and most sophisticated issuers competing as heavily as ever — including developing stronger cardholder value propositions — credit unions cannot rely on goodwill and inertia to carry them forward. Instead, they must develop employee skills and dedicate institutional resources to protect and grow this business.

Translating opportunity into strategy and strategy into action can be a challenge, particularly for those who view credit cards from an operational perspective. Getting bogged down in technical matters, EMV concerns, mobile wallet turbulence, or any host of day-to-day distractions is easy. But successful issuers lift their eyes toward the horizon and adapt to keep their programs growing and performing year-over-year. They do no count on third-party processing organizations to do all the thinking for them.

So, what does a credit union issuer need to understand and improve upon to position its credit card program for the next several years? A few crucial traits will separate the top performers — and earners — from the rest of the pack.

Understand The Entire Market

Too often, issuers base their credit card products and plans on their own book of accounts and a few other issuers in their area. Cards exist in a national market, and large banks still issue 90% of these accounts. Knowing what the banks are up to, what segments they are most aggressively pursuing, how they are designing and positioning their products, and which of these pose the biggest threats to your member relationships is critical for any forward-looking credit union card issuer.

Keep The Product Set Fresh

The classic/gold/platinum product set construct is a relic of the past. But even many modern programs are at risk of falling behind market expectations in terms of rate options, special promotional programs, targeted loyalty/reward propositions, service delivery technology, and high-end card type options. Credit unions cannot look at their card product design once every five years; they must continuously analyze and refine it, which often takes place behind the scenes and beyond the average cardholder’s understanding.

Segment Members

The term “credit card” means different things to different member segments. For some, it is a product to which they aspire but do not yet qualify. For others, it is a source of regular or occasional credit. And for others, credit cards are transactional tools valued for convenience and rewards. Issuers must develop a segmentation approach based on member viewpoints that matches product value and member expectations. Mismatching product value and member desires results not only in less growth and income but also in increased risk that cardholders will become dissatisfied and defect to a rival offer.

Develop People For Strategy

Many organizations have not sufficiently invested in the skills required to run their program. Often, day-to-day responsibilities fall to an operational function, whereas medium and long-term planning require a more strategic view. In some cases, the people setting the credit card strategies don’t adequately understand the product’s financial performance or marketplace appetite for the value proposition.

Those running a card department need not only a strategic mindset but also strong analytic and tactical skills, and developing this staff requires both management support and institutional investment. It might be difficult to find a perfectly experienced and skilled card manager. That’s why identifying and training promising internal staff is often a better solution than bringing in unfamiliar external hires.

Use Reporting As A Strategic Advantage

In the world of financial services, good reporting and the guidance it provides is a critical strategic advantage. Good reporting provides actionable information and guides daily decisions regarding resource allocation. A successful issuer needs to be able to answer questions such as:

  • How much money does this product make?
  • What is its ROA?
  • Which products are growing?
  • Are cardholders borrowing and spending more or less than last year?
  • What was the response rate on our marketing campaign? Did that provide sufficient returns?

When properly armed with this type of knowledge, an institution can begin to make smart, focused, and justifiable decisions on resource allocation and product design. Make no mistake, credit unions that are struggling or have been merged out of existence have often been historically weak in reporting or performance measurement. This leads to bad resource allocation decisions over time, potentially resulting in competitive failure.

Prove, Advocate, Thrive

Even the best run credit union programs need to sell their performance to internal management teams, colleagues, and the board. And card programs in particular require a regular stream of marketing and program management resources to meet their potential.

An organization with all of the skills listed above still needs to translate program performance into information so these constituencies can understand the program’s value, share in its success, advocate for it, and confidently provide the resources to keep building it. When the entire organization has a singular view of its card program, a credit union can compete with even the largest large bank issuers.

Unlike other loan products, a successful card program does not have a date when it will run off. Existing accounts can stay on the books for decades, generating income while augmenting other products within the overall member relationship.

Even a smaller program, like credit cards, can be an institution’s highest earning and offer the most long-term value to the organization. Credit unions who realize this — and who choose to continually support and invest in this important business line — will have a brighter future.

Optimize Your Credit Card Program

The 2014 Credit Card Management School, a partnership between Callahan & Associates and TRK Advisors, helps credit unions optimize their card portfolios and better understand the latest trends in program design and management. Tim not only knows credit cards, he is know for his "speaking style, sense of humor and quick wit." Another attendee commented [Tim is] "awesome. If you are looking for a number, 9.99 out of 10 as no one is truly perfect but he is pretty darn close. Great sense of humor too."

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About The Author
TimothyKolk is the owner of TRK Advisors and brings more than two decades of credit card experience and expertise to his clients. Kolk has helped credit unions across the United States improve their card programs, better serve their members, and create long lasting, high performing card programs. He can be reached at or (603) 924-4438.

About TRK Advisors
TRK Advisors brings unmatched expertise to any card issuer. Areas of expertise include program performance analysis and opportunity identification, market and member segmentation, product design, processor RFPs, marketing program development, affinity/cobrand programs, de novo (startup) programs, and much more.