CHALRESTON, W.Va. — Pioneer West Virginia FCU has increased its credit card balances by more than 33% each of the last two years and is on pace to beat those results in 2013. The CU credits the jump to bringing the management of its portfolio in-house.
Dan McGowan, EVP and CFO, contends that if the credit union has attractive pricing and the skilled staff to manage and market credit cards, the move inside is the way to go. The $155 million credit union shook its cards business up in 2011, after new leadership came on board in the summer of 2010, including McGowan.
"We evaluated our existing relationship with a third-party credit card administrator and we were disappointed," said McGowan. "We felt the vendor was unresponsive to our needs and wanted to force our program to be just like most 'cookie-cutter' mass-marketed programs. That was unacceptable."
A plain-vanilla approach to marketing its Visa card did not allow effective promotion of what McGowan said are unique and very member-friendly features: risk-based pricing, with rates as low as 4.95% APR; no annual fees; no balance transfer fees and no cash advance fees.
"We cancelled the vendor contract and struck out on our own and got some phenomenal results," McGowan said. "We established one of the most rapidly growing portfolios in the nation in terms of percentage growth. For the past two years, Callahan's annual credit union directory has identified Pioneer as among the top 20 credit unions in the nation in terms of percentage growth of outstanding credit card balances."
Bringing marketing in house gave the CU the flexibility to not only promote the features of its card the CU knew would increase activity, but to also adjust rate for a key borrowing segment. "We offer what may be the best consumer value in the nation for those who routinely carry balances," said McGowan. "Early in 2013, the ALCO committee agreed to drop the most favorable rate from an already low 6.95% by a full two percentage points. Our card pricing now ranges from 4.95% for A+ credit to 17.75% for the lowest qualifying scores."
That change, along with strong employee incentives, has PWVA standing at $8.5 million in credit card balances as of Sept. 30. "Our original goal was to have $7.2 million in outstanding Visa receivables by the end of the year and we have blown past that. Our new 2013 goal is $10 million."
The move has also improved delinquencies to near 50 BPs and charge-offs at less than 1% for the last two years. "To bring management of your card base back in house we believe top-level management has to be supportive fully of the move, and they have to provide adequate resources to sell the product to the membership and internally administrate it," offered McGowan. "Your card administration staff must be top-notch, as well."
During the last three years, the credit card portfolio has grown from 5% to now 7% of the credit union's overall loan portfolio, noted McGowan. "Outsourcing may be fine in some cases, but not when it requires conformity with the mass-market herd, and backing away from core member values and service. Don't be afraid of doing it better in house, when you can."
