By Brian Scott
Credit card accounts are a credit union’s greatest relationship builder, but also its most forgotten and least optimized asset. Historically, credit card accounts are easily the highest yielding asset in most credit union’s portfolios. But once the hard work of getting a card in a member’s hand is done, it is not enough to sit back and wait for good things to happen. Attrition typically begins to occur 18 to 24 months into the credit card relationship, and a member’s usage patterns start to change.
Credit unions can employ several tactics to prevent attrition, keep the performance of the card program high, and in many cases, actually grow the profitability of the credit program by following a cardholder’s financial journey through life.
Here are five strategies credit unions can implement to keep their members happy and their credit card programs profitable:
- Ongoing Credit Score Evaluation. No credit union would issue a card without closely examining cardholders’ credit scores and their ability to pay. That same logic should apply on an ongoing basis. At least once a year, you should review the credit scores in your portfolio and look for those members that have changed up or down in a significant way. Risk-based pricing is not only a good strategy when issuing a card; it is also a great strategy to keep your card top of wallet. Your card products should always be adapting to fit the changing life scenarios of your members.
- Credit Lines and Utilization Review. One of the key results of reviewing credit scores is the ability to adjust members’ credit lines. Many studies show that members’ spending begins to drop when they reach 40 to 50 percent of their total line. In many cases, these cardholders have done a great job managing credit and should be rewarded with a larger credit line. This will ultimately result in higher spending, increased balances and increased finance charges.
- Rewards and Promotions Integration. As a member’s financial journey through life changes, so does his or her desire for rewards and promotions. Early on, most members are concerned with low rates and fees since they anticipate carrying a higher balance. Over time, the desire for rewards programs and promotions becomes a larger driver of usage and loyalty. Adjusting these features for your cardholders can have a significant impact on the profitability of your programs,
- Marketing Investment. Marketing your card products does not end at the point a member chooses your card. Your members are continually bombarded by offers from other issuers, and marketing to your existing cardholders remains one of the most effective tools to staving off attrition. Others may have flashy offers that seem attractive to your members, especially if they are not consistently reminded of the features and benefits that accompany your program.
- Third Party Power. Consistent, positive growth occurs when credit unions execute on strategies and tactics. During an era when the payments universe is changing at breathtaking speed, look to your third party relations like a trusted CUSO’s deep resources, experience and access to key industry experts and partners. These can be a credit union’s best tools for higher growth, greater relevance and stronger member relationships.
As SVP of Business Alliances at PSCU, Brian Scott partners with industry leaders in payments and community financial institutions to create competitive payments programs. Brian helps credit unions position themselves competitively in their own communities and maintain profitability throughout their payments programs.