The Importance Of Rates

Do credit card rates affect member usage?


Credit unions report the most common rate for various loan products on the 5300 call report. Although the information is backward-looking, it provides valuable insight into the question: Does the most common rate offered by a credit union affect member usage of the product?

The following table outlines several variables, including credit card penetration and credit card rate, within four peer groups. In the four groups, the first which encompasses the other three, there is little variation in credit card rates. The average rate of the group ranges by less than 100 basis points from 0.57% to 11.26%. The group with the highest rate, credit unions with less than 10% credit card concentration and penetration, has the lowest penetration rate. However, the group with the lowest rate, credit unions with more than 10% credit card concentration, doesn’t have the highest penetration rate.

Credit unions with less than 10% concentration and penetration have the strongest growth in balances and number of accounts over the past year. Because of regulation changes, many credit unions have more aggressively marketed their card programs, and these credit unions may have recognized an untapped opportunity among their members. Credit unions in the remaining two sub groups had slightly slower, but still strong, growth. Members at these institutions may have already been using or aware of the credit union’s card offering.

Across the groups, there was little difference in reportable delinquency, though there are differences in the charge-off rate. Credit unions with a greater concentration of loans have a higher net charge-off ratio.

Rates, penetration, concentration, and growth are all important metrics to gauge a credit card portfolio performance. Click here to learn more about credit unions response to card regulation and to learn about leaders in credit card penetration.