Two Steps To A Better Portfolio

By Gary Barth

When credit unions want to dedicate time and resources to improve credit card portfolio performance, they should take two initial steps:

1. Activate inactive accounts. While still challenging, it’s easier and more cost effective to activate an inactive account than to acquire a new, unproven account. The challenge is to move your card to the “top of wallet” by offering a better value proposition than other cards your members carry.
   
   You may accomplish this by increasing the credit line, lowering the annual percentage rate, or making balance transfer offers at very low rates. Consider rewarding cardholders for using your card over a competitor's—but only if the revenue you expect to earn exceeds the cost of the reward.
   
   Conduct a survey to find out why cardholders aren’t using your cards, and respond accordingly. Check the risk profile and ensure that credit lines and pricing are commensurate with risk. Don't neglect to communicate your strategy if you want cardholders to change their behavior.
2. Retain active accounts. Make the retention of valuable cardholders a primary focus. Provide credit-line increases to qualified cardholders with high use rates against their existing credit lines. Offer balance transfer offers, convenience checks, and promotional rates. Selectively up-sell high-value cardholders to better products, such as a platinum card with enhancements or a reward card with higher limits. Implement "win-back" strategies for every good account on file and empower retention specialists among your staff to employ these predetermined strategies to minimize account closures.
   
   Credit cards differ from other loan products in that they’re a constantly renewing loan subject to intense daily competition. The portfolio’s long-term health and growth requires continuous effort, dedication of staff and resources, and a focus on account-level management.

Gary Barth is senior vice president of AssetExchange, Portland, Ore. Contact him at 503-220-0007.