ST. PETERSBURG, Fla.-The American consumer is increasingly using his or her credit card for a trip to the grocery store rather than a fancy dinner out, which PSCU Financial Services says is a common occurrence when the economy turns sour.
Credit Union Journal asked the supplier of credit, debit, ATM, prepaid, electronic banking, bill payment and contact center services to give a report on how the economy is affecting the credit and debit card sectors. Two spokespersons, Glenn Schechter, director of credit services, and Tom Gandre, chief debit officer, from the nation's largest CUSO said even though times are rough, they still see growth on both fronts.
CUJ: How are credit card portfolios performing in this economy?
Schechter: PSCU Financial Services is seeing our member credit union portfolios grow on par with the industry, at nearly 14% in 2008. While some industry analysts see credit cards as a mature and saturated product, industry data does not bear out this assumption.
CUJ: Are people using their cards even more as they struggle to keep up with the increasing cost of just about everything, or are they pulling away from cards as they try to eke their way out of debt?
Schechter: To be sure, both consumer and small business spending patterns trend to the national economy. PSCU Financial Services and its credit unions view credit cards as a product that meets the needs of the marketplace. We do see a small shift in spending from traditionally discretionary merchant categories, i.e., restaurants; and see a corollary increase in merchants supplying necessity items such as groceries. This is a natural trend seen in every economic slowdown.
Also interesting is the percentage of credit card users who revolve, or do not pay off their accounts in full each month, has not materially increased. This dispels the idea that consumers now use credit cards to fund the necessities of life that they otherwise could not afford.
CUJ: What about card delinquencies?
Schechter: Credit losses have etched up only very slightly; approximately 13 basis points.
CUJ: Do you expect debit card volume to shift to credit card volume due to economy?
Gandre: To date, we have not seen any significant impacts to debit purchase behavior based on the economy. Our company continues to see organic growth in both PIN debit and signature debit transaction volumes. In fact, we expect our overall debit transaction volumes to grow around 20% in 2008.
CUJ: What strategies are CUs using, or should be using, to try to build debit and credit card share in this market?
Schechter: PSCU Financial Services provides our member credit unions with a full suite of services that helps grow this product in a safe and prudent manner. These include tools that model risk parameters, provide creditworthy cardholders with line increases, offer merchant discounts to targeted cardholder segments, teach cardholders money management courses, and cross-promotion offers to deepen the relationships they have with their credit union members.
Gandre: Debit cards provide safe, convenient access to the member's checking account. For many, particularly the youth segment, debit cards provide an effective way to manage their money through the use of web banking, ATM access (balance and mini statement information) along with spending tools.
There continues to be an opportunity to grow debit volumes with marketing and promotions activities including: rewards offerings; penetration, activation, and usage promotions; consumer education about card safety; and marketing activities designed to boost checking account acquisition.
