Credit card opportunities are expanding for credit unions. Increased balances and market share provides a turning point for credit unions to evaluate their portfolios and refocus on member credit card needs.
After declining for three years, credit union credit card market share has reached 3.02 percent as of June 2006, an 18 basis point jump from the prior year. While still small, in a market in which 10 institutions hold 90 percent of the balances, credit unions are demonstrating that they can compete. Increased presence in the market has been fueled by steady growth for the last three years.
Credit union growth in the credit card market is outperforming banks’ results. From June 2004 to June 2005 banks grew their credit card portfolios by 13.5 percent whereas credit union portfolios grew by less than half of banks at 5.6 percent. In the past year, however, credit union credit card growth has outpaced banks by almost four times! Bank portfolios grew just 2.2 percent as compared to credit union’s 8.3 percent growth.
Credit Union Opportunity
Credit unions have not traditionally carried a wide-range of credit card products and services. However, as the option to sell credit card portfolios has become more prevalent within the industry, many credit unions are taking a closer look at offerings and services and deciding how to proceed. Here are some options that credit unions have used to rebuild successful credit card strategies:
- More card options
- Example: MCT $373M, Maryland
In addition to its traditional C credit rated classic credit card, MCT now offers two other classic credit cards: a student card and a secured card for first time users. After conducting a membership analysis it was evident that most of the credit union’s new members were under 35 and had little, if any, credit. As a result, MCT introduced both the student card and the first time card to appeal to this market segment.
- More frequent credit line reviews
- Example: BCU $1.1B Illinois
BCU believes that appropriate credit limits are essential for good relationship management. The credit union hired a company to conduct a monthly review of all the credit card accounts based on set guidelines provided by BCU such as risk, balance and behavior. This information determines the quarterly credit limit increase BCU offers each member.
With continued focus on credit card portfolio development, credit unions can top the growth of their competitors and capture market share. To compare specific credit union card portfolios to national or peer averages, click here to request a demo of Callahan & Associates’ Peer-to-Peer software
- Targeted marketing
- Example: Community First CU of FL $1.1B, Florida
Community First has more than doubled the number of card campaigns, conducting nine in the past year. Taking into account general member habits, the credit union took a lifestyle approach to its marketing strategy. For example, recognizing member needs post-holiday season, the year began with a balance transfer promotion. In the summer, Community First related the campaign to popular pastimes like travel and home improvement.