CLEARWATER, Fla. — Credit unions looking to boost ROA should turn to credit cards and platinum programs, which generate 7% more revenue than standard card products.
That's a strategy recommended by Bob Hackney, president of CSCU, who will outline details about how to raise card portfolio business at the Grow Show, April 27-29, in San Diego.
"When you look at the ROA of the different credit union loan products, credit cards are by far the highest," offered Hackney. "According to Raddon [Financial], in working among their client base and examining credit cards, home equity, mortgages, and auto loans, credit cards were the highest ROA-yielding loan in the portfolio."
It's interesting, Hackney pointed out, that the product that delivers the highest ROA is such a small percentage of the total loan portfolio, citing the growth opportunity. "I believe that industry wide approximately 50% of all credit union loans are mortgage or equity, 30% are auto, and cards range between 5% to 10%."
One of the points Hackney will emphasize in his session titled "The Power and Profitability of Card Relationships" is that credit unions without card portfolios, on average, have significantly lower ROA than those that offer credit cards. "And those that have platinum fare the best," he said. "I'll show that platinum drives a lot of metrics."
Among the platinum strategies Hackney will share is that credit unions should offer two platinum programs, one with rewards and an annual fee to help pay the program's costs, and another without rewards and an annual fee that's price driven. "The key thing is identifying the cardholders to increase limits with," Hackney advised. "The good targets. You do not want to make blanket decisions. You want to be selective."
Hackney emphasized that the business-generating solutions he'll share at Grow Show have been proven over time through CSCU-serviced portfolios. "These approaches work and they drive metrics. Platinum drives usage and usage drives volume, and platinum drives outstandings. At the end of the day all of those things improve revenue and the credit union's health."
Hackney, who has been president of CSCU for 11 years, re-emphasized that one of the most telling statistics that underscore the impact credit cards have on ROA surfaces when comparing loan product returns. "According to Raddon numbers a few years back, credit union auto loan ROA stood at .3%, real estate 1%, and credit cards were 1.8%. And the overall ROA for credit unions a year ago was .75%," he said.
In The Know To Grow
What: Credit Union Journal's Grow Show.
When: April 27-29
Where: Hotel del Coronado, San Diego
Who: For CU professionals desiring to grow their operations
Why: Because if you don't grow, well...
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