To Sell or Not to Sell: That is the Credit Card Question

During the past ten years, credit union strategy has been mostly the attempt to extend existing businesses’ capabilities. This includes adding new markets, improving balance sheet products and developing new channel outlets such as shared branches or indirect auto lending. The result is a bigger credit union, but with the s


The decision as to whether to keep or sell your credit card portfolio is unique to each credit union. However, learning from credit unions that have gone through the decision process can help those that are exploring their options. The following is just one of the case studies highlighted in the 2003 Technology Survey which looks at the key decision points considered by credit unions during their portfolio review.

Anheuser-Busch Employees Credit Union: Earning Solid Returns By Committing to the Business

It's not as if the offers to buy the credit card portfolio haven't been made because they have, like clockwork, in fact, by vendors and consultants alike. But Dan Vogler, executive vice president of administration at Anheuser-Busch Employees Credit Union, St. Louis, Missouri, said the credit union decided to retain its credit card portfolio for one simple reason: it's a money-maker. "We get one of our highest returns on it and we feel we're in it for the long haul. We believe it will be a constant source of revenue, and yes, we know that it will take some effort on our part to ensure that."

The credit union's $35 million portfolio of Visa Platinum and Classic cards provided a 5.75% return after net charge-offs, marketing expenses and other operational costs, said Vogler. "That tells me it's still a good return for the money." Given that the credit union's charge-offs have remained at the 2.3% mark for nearly 10 years and the cost of funds is hovering at 2%, the 27,000 credit card accounts provide stable earnings potential, he stressed.

"We've stepped up our balance transfer marketing, but that's a tried and true approach. We simply want more of our plastic out there. In mid-July we're reducing rates to 8.9% for our highest credit quality members and will try to grow the number of accounts." Anheuser-Busch ECU has 76,000 members and applies tiered pricing to its credit card accounts. Said Vogler: "We have rates that go as high as 14.5%."
Overall, Vogler thinks some credit unions that sell their credit cards just haven't done their homework, or haven't analyzed the portfolio in the right light. "How do they value the portfolio? Do they value it internally?" He said that Anheuser-Busch would earn $2 million from its portfolio this year and that if properly structured and maintained, it would continue to generate reliable yearly income. "While I cannot disclose the value of the buy offers, they typically represent three to three and one-half years' profit of the portfolio. I can see how that may be very attractive to some credit unions, but it seems short-sighted to me."

"We just weren't ready to do that. We'd rather run our portfolio smarter. I'm not saying it's easy, but once you let it go, it's gone, and we didn't see any compelling reason to let it go."

This article is part of an expanded look at the decision as to whether to keep or sell your credit card portfolio from Callahan's upcoming 2003 Credit Union Technology Survey publication. In it's 11th annual edition the Technology Survey provides in-depth articles and case studies on important technology issues affecting credit union strategy including data processing and e-channel strategies. The credit card section of the Technology Survey also contains an exploration of the state of credit cards in the credit union industry today with models for measuring credit card profitability, and more. The resource also features a comprehensive listing of vendors/providers who currently offer credit card processing and the credit unions who use their services. Click here to learn more and pre-order your copy today!




June 17, 2003


  • This was an excellent article. A very big topic of conversation these days and the statement that sums it up is "I'm not saying it's easy, but once you let it go, it's gone, and we didn't see any compelling reason to let it go."
  • It was refreshing to see a strategy that encorages keeping the portfolio.
  • With a claimed 5.75% return. I'd like of pound of what he's been smoking. Do you really believe that number? He's shows a 1.05% ROA as of 3/31/03... are your telling me his credit cards actually make more than he other loans... b.s. Gerd Henjes, Pres./CEO Countryside FCU
  • How did the CU determine the contribution margin on this product?