Four Things Every CU Needs To Plan For

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DES MOINES, Iowa-Four things should be on credit unions' radar in the second half of the year, according to The Members Group. 

EVP Jeff Russell predicted that with economic forecasts improving, there's a strong chance the Fed will begin to raise rates by the end of the year, requiring that credit unions now begin assessing how a rising-rate environment could impact fixed-rate credit cards.

Russell noted that credit unions are not in a position to have any of their margins squeezed. "If I offer 9.9% on my card and rates go up 1%, I lost 1% of my yield, assuming nothing else changes-charge-offs and operating expenses stay the same."

Increased credit card competition can't be overlooked, as the big issuers are coming back with aggressive offers, going after balance transfers, Russell said.

"We have seen a number of 0% for 15 month type of offers. What are credit unions going to do to keep their current credit cards competitive? Maybe photo cards, new rewards?"

Conversations TMG has had with credit union executives indicate a growing concern with lending, with many stating they are looking inside their own memberships at recapture programs for opportunity. "The marketplace is very competitive in the core credit union lending areas, especially auto loans," reminded Russell. "So how do I gain more market share from loans that are available?"

But those issues may take a back seat, Russell said, to the biggest bogey on the horizon for last half of the year: What changes are credit unions planning to make to address the potential affects of the Durbin amendment?

"What is the business model change credit unions need to implement as we move from an environment in which we had implicit debit card pricing-merchants pay financial institutions for the transactions that consumers make-to an explicit pricing model where merchants are not paying enough for financials to break even," Russel asked. "Now credit unions have to charge members something for the transaction or the accounts they have. Now we are moving to a more fee-for-service environment."

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