Cards, Interrupted

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DALLAS, Texas-Credit unions have a prime opportunity to make inroads in card services, thanks to new federal regulations.

The CARD Act, though seen as an inconvenience, at best, by many CUs, has really "disrupted the national issuers' business model to a far greater degree than it has credit unions,'" said TNB Card Services' Mark Fenner.

Fenner suggested most major issuers have been forced to make "dramatic changes" by reducing credit lines, cutting rewards and raising rates, all of which are hurting loyaltys. "Many of those cardholders are credit union members and many who are not are being directed to go to credit unions by the national press or consumer advocates. The consumer advocates have really gone over the top in promoting credit unions," Fenner noted.

With quality mortgage and auto loans hard to come by, the card portfolio is a strong channel for growth, Fenner argued. "It is a great time to grab high-quality cardholders."

CUs are recognizing that opportunity and putting greater emphasis on card portfolio growth, Fenner believes, noting that TNB experienced a nearly 15% year-over-year increase in organic balances, and saw accounts jump by 5% as of May 31. The entire CU community has seen balances increase 7.4% and accounts increase by 1%-2% over that same time period.

While he sees no "silver bullet" to bring more members into the fold, Fenner stressed visibility using website ads, in-branch advertisements, targeted direct mail and cross-selling to ensure members know what products are available. On the rewards side, some have cut back or eliminated their programs altogether and had no impact to the bottom line, while other CUs are ramping up their rewards offerings. "I still think rewards are a motivator for transactions in the portfolio," Fenner said.

TNB is a "big advocate" of understanding the target markets and the goals on the business side as well as the member service side before offering a rewards program.

CUs look at their markets to determine how competitive they need to get, Fenner explained. Fenner pushed for more segmentation and possibly only offering the best benefits to those that provide the most transaction lift instead of rewards for all cardholders.

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