Revitalizing a static card portfolio requires careful due diligence to achieve success. Competing with the massive marketing budgets of large financial institutions, credit unions must clearly understand their membership and respond promptly to member needs. Credit cards are both an important member touchpoint (the average card relationship lasts 7 years) and a key revenue driver for the credit union (the card portfolio registers the highest ROA of any CU product).
A combination of factors, including banks tightening lending standards coupled with decreased net income, present a compelling opportunity for credit unions to evaluate their portfolio from both the institution and member perspectives. Although there are reports that credit card direct mail offers are declining in this tightened credit market, credit unions should periodically review their credit card offerings to ensure they are competitive with other offers members may be receiving, and highlighting key benefits of the credit union card, including:
- Low interest rates
- No/low annual fee
- E-alerts / Online access
- Educational offerings (e.g. Financial counseling)
With the heightened publicity surrounding practices such as universal default, credit unions have a great opportunity to re-position their card and the benefits to members. Credit unions who have recently reclaimed previously sold portfolios should also review the current marketing programs to determine next steps in promoting their product.
If you find that changes need to be made, what is the most effective way to restructure a credit card program? A carefully thought out approach to your front-end planning makes the best use of staff time and resources. At SCE Federal Credit Union ($430M in El Monte, CA) executives decided to ramp up the portfolio’s rewards card to drive performance in the program by publicizing the incredible value the card offers members. Six key steps defined their approach:
- Recognize the nature of the problem - In the card program, 98% of cardholders held non-rewards cards. While some were not aware of the rewards card or did not want one, others were discouraged by the annual fee. The executive team at SCE decided to focus on the renovation of the rewards card for the benefit of the members and the credit union.
- Set the goal(s) - For SCE, theirs was simple: revamp the rewards program with a multi-tiered approach.
- Restructure the terms - By eliminating the annual fee, the credit card gained needed traction. To compensate, the new best rate was raised 200 basis points and a balance transfer fee was added.
- Empower the staff - The credit union provided staff training and re-introduced the ScoreCard Rewards website to all personnel. Developing an incentive program for the card program helped make the card an integral part of the portfolio well beyond the roll-out of the revamped card.
- Effectively market the changes - Incentives were given to members, including triple points at eligible merchants. The credit union launched a 15-week seasonal promotion in late 2007/early 2008.
- Evaluate the results to measure success - At SCE, the number of platinum rewards cards tripled with outstanding balances doubling. Additionally, members brought in over $1,000,000 in balance transfers and cash advances.