Credit unions nationwide face a new, revamped market. The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 changed entirely the conditions under which financial institutions must operate.
But according to a CUNA Operations, Sales and Service Council white paper, the CARD Act gave also credit unions several advantages over other credit card issuers.
New legislation drastically limits the late payment and penalty fees credit card issuers can charge cardholders, according to "Credit Card Pricing: Effective Strategies for a Post-CARD Act Market."
Credit unions earned very little revenue from such fees before the CARD Act; only banks profited much from these fees.
Banks are now raising interest rates, reducing credit limits, and eliminating rewards programs to compensate for lost revenue, the white paper points out.
Frustrated with banks’ deceptive pre-CARD Act policies and poor post-CARD Act service, consumers will be looking for alternative credit card providers. Exemplary service and personal relationships during the economic downturn proved credit unions’ consistent devotion to consumers.
But credit unions must now advertise this service to attract new members.
The industry continues to debate the use of fixed rates or variable rates, the paper notes. Here’s why:
The CARD Act and other recent legislation also aims to make rates more transparent to cardholders. Now credit card issuers are required to tell consumers about any changes to their account 45 days beforehand, giving them the chance to opt out before their policy changes.
They also can’t make changes to an account in its first year.
Advice for credit unions:
Overall, credit unions must let consumers know what they can do for them.
“Credit unions have been the sleeping giant in the industry,” says Chris Joy, strategic portfolio consulting group director at PSCU Financial Services, St. Petersburg, Fla. “They have all the features and function you can get anywhere, and that total value package needs to be at the forefront of any marketing they do.”
"Credit Card Pricing: Effective Strategies for a Post-CARD Act Market," is available free to members of the CUNA Operations, Sales, and Service Council. The price is $50 for nonmembers.