Lending

Credit Cards: Learn From the Best-Run Programs

Analyst says 2012 is ‘the year of credit.’

July 11, 2012
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This is the “year of credit,” says analyst Ondine Irving, as more consumers obtain credit cards and credit union credit card loans outstanding continue to increase.

More than 53% of credit unions offer credit cards, and credit unions’ overall card portfolios grew 0.6% during May, according to CUNA’s economics and statistics department.

Credit unions can improve their card programs with more efficient operations and marketing, and by avoiding some common mistakes, says Irving, owner and founder of Card Analysis Solutions.

She cites these mistakes include having:

  • Too many card programs;
  • Low and outdated fee structures;
  • Credit union employees who don’t use the card; this makes it more difficult to sell to members;
  • Over-reactions to delinquencies and charge-offs; and
  • A weak website presence, making it hard to find credit card information.

What the best-run credit card programs have in common, Irving says, are a commitment from management, fair and ethical program structures, a product champion, a willingness to take risks, and ongoing member education.

“Make sure your card program is not an orphan,” Irving says. “Determine who has responsibility. The characteristics of a good card-product owner include someone who is part operational management and part analytical management.”

She says credit card programs should have these features:

  • A platinum offering;
  • At least one fixed-rate card;
  • Risk-based pricing;
  • No balance-transfer fees;
  • No penalty pricing;
  • Late fee of no more than $25;
  • No annual fee; and
  • Optional rewards.

Credit unions should strive to earn an average of $75 to $100 annual net income per account, Irving says, and expect credit cards loans to account for at least 10% of the overall loan portfolio. Some other benchmarks:

  • 65% of accounts should be active;
  • The average credit line should be at least $7,500; and
  • Charge-offs should be less than a 2%.

The mix of credit card revenue should be 70% from finance charges, 15% from interchange income, and 15% from fee income, she adds.

Irving advises credit unions to conduct a fee audit because many miss out on late fees. However, credit unions should verify the late-fee grace period with their processor to make sure system parameters reflect disclosure information.

Another tip for success: Give all new members a credit card as part of their membership, Irving suggests. “They shouldn’t have to ask for one.”

Irving addressed the America’s Credit Union Conference in San Diego. Next year, this conference will be held in New York City June 30 to July 3.

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Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

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