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ST. PETERSBURG, Fla.-Leveraging the CU's affinity with its membership is one of the most effective ways to drive credit card penetration.

The strategy works for a number of CUs that are leading the country in credit card penetration. Credit card experts who spoke with the Journal agree, too, with the approach, emphasizing the critical role member loyalty plays in differentiating the CU's card from major issuers. Creating ties to a common bond with the credit card, say analysts, is a marketing advantage single-SEG CUs enjoy over banks and even community chartered credit unions.

PSCU Financial Services EVP Chuck Fagan stressed affinity is a differentiator only after the credit union has a good credit card deal.

"The offer must first be compelling," observed Fagan. "If you don't put out an offer that is at least competitive with what people get in the mail or see on TV, you won't be successful at gaining a high percentage of your members' credit card business. But once you get to that par level against other offers, then loyalty and affinity are big factors."

Creating the tie can be as simple as the look and feel of the card, offered Fagan, suggesting that credit unions that serve multiple SEGs can personalize the look of their card per SEG by using low-cost card reproduction processes. "Use digital plastic to make the cost reasonable."

Bill Lehman, VP of portfolio consulting for CSCU in Clearwater, Fla., warned that too often credit unions create a credit card by looking outside the CU to the local competition and should instead look inside at the unique needs of its membership (Credit Union Journal, April11).

"Create a card that reflects the uniqueness of your membership. If you cater to a lot of college students, it might be placing a picture of the steeple at your college on the card. Maybe it's a card with local scenery, or a card with affinity to a local sports team."

In Des Moines, Iowa Jeff Russell, EVP of The Members Group, emphasized the importance of affinity in battling the big boys. "Realize that the top seven credit card issuers control at least 90% of the market. Differentiation has to be part of your strategy. Credit unions do not have the means to match all the direct mail offers and the 30 different card options of the large issuers."

The question, stated Russell, is who is the credit union targeting and what value proposition is important to the member segment? Community-chartered CUs, contended Russell, have a harder time answering, but noted some strategies that are working. "Some community chartered credit unions develop a hyper-local strategy, for example, positioning themselves as the credit union for the local city and invest back into the town. Another example is a cause-based reward, like donating reward points to local schools."

Russell reminded that another question to address is what segment of cardholders does the CU want-revolvers or transactors? "Transactors are harder to get your arms around because they are always searching for what is the best rewards deal. Revolvers are primarily looking for the lowest rates and fees."

If the credit union cannot create a natural tie to members based on employer group or community, Jennifer Kerry, VP, credit card services for Co-Op Financial Services in Rancho Cucamonga, Calif., suggested a bond can be made by tying rewards points to CU services. "Let them use points to buy down loan rates or increase CD rates. Also, give them points for using cost-saving services, such as bill pay."

Kerry added that the credit should give staff flexibility to use reward points to attract new members. "For example, if a customer comes in to join but won't take the credit card because they have 5,000 points already on their Chase card, give them 5,000 points."

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