CLEARWATER, Fla. - Credit unions looking to jump start credit card portfolios should focus on balance transfer and platinum upgrade promotions to drive revenue, according to one company reporting success doing just that.
In looking at credit card data from its customers, advises Tom Davis, VP-finance and technology with Card Services for Credit Unions (CSCU) here, credit unions are "most deficient" in these two areas when compared with the rest of the financial industry.
"About 30% of (CU) portfolios are platinum and the industry average is 50% to 60%," said Davis, who estimates that CSCU claims 70% of all credit union card portfolios. "And for balance transfers, our average cash advance trails the industry by several-hundred dollars a month per card."
18% Increase In Oustandings
Recently, CSCU client TECU Credit Union in Wichita, Kan., ran a two-month balance transfer promotion and posted an 18.2% average balance outstanding increase, Davis told Credit Union Journal.
"In addition, they saw a total outstanding increase of 33%," Davis said. "Last year during the same time period they saw an increase of just 3.5% in their average balance outstanding."
CSCU believes that to grow credit card business, credit unions must understand their portfolio's strengths and weaknesses. TECU used CSCU's Virtual Card Consultant (VCC) web tool, which it says allows CUs to more closely manage their card portfolio by learning where their portfolios are doing well and falling short. Balance transfer is the area in which VCC data indicated the $63-million TECU had the greatest potential for greater revenue.
VCC, version 2.0, was introduced this year and CSCU credit unions using the tool are up 4.42% in accounts, 2.71% in active accounts, 5.5% in total volume, 7.01% in total revenue, and 9.87% in total outstandings, Davis said.
"Each month, VCC gathers and interprets member credit union card transaction data and turns it into easy-to-understand information," Davis said about the tool that's accessible via CSCU's website. "It helps them identify their highest revenue-generating opportunities. VCC even recommends proven penetration, activation, usage, and retention strategies."
Offered free to members, VCC also shows credit unions how they stack up against their CU peers, which helps in determining portfolio areas to target, explained Ed Jesionowski, business consultant for the Plymouth-based Michigan Credit Union League. "Using the tool allows credit unions to make the best use of marketing dollars and spend them in areas in which they have the greatest impact.
'Important Data Field'
"About 50% of Michigan credit unions use VCC," Jesionowski added. "I think one of the most important data fields is average credit line. For many of the credit unions I visit, their average credit line is $500 to $1,000 lower than what the average credit line is for those credit unions doing well in this area. The second thing to look at is penetration, which should be around 35%, but often we see it around 18%. If their average credit line is at $2,400 and should be at $4,000, they need know this and do a credit increase limit program." (c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com/ http://www.sourcemedia.com/
