Prestige + Value = More Profitable Portfolio
CLEARWATER, Fla.-For the credit card portfolio to make a strong contribution to the bottom line, the CU's card must convey value and prestige.
Bill Lehman, VP of portfolio consulting for CSCU, insists that is the formula needed to get members to place the credit union's card top of wallet. "We are encouraging credit unions to remove the old barrier of the classic card that no one wants to pull out of their wallet. In today's environment, classic is not cool."
The answer, however, is not necessarily offering a platinum card, but delivering a card that reflects the uniqueness of the membership, said Lehman. "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. Think about ways you can have the product offer prestige."
That can only happen if the credit union moves away from the three-tier structure-classic, gold, platinum-offered Lehman. "Offer one product for all members and risk price."
Lehman said risk pricing delivers two key advantages: acquiring and retaining high-value cardholders at attractive rates, and going deeper into the membership. "Balance risk and reward. So the product structure may be a little different for A and C credit. For C we may not only increase the rate, but as creditworthiness slides, we may also incorporate different fee structures and different promotions and incentives."
Overall, Lehman said, the credit union needs to structure its card to the membership. "A lot of credit unions produce a product that their neighbor produced, or is based on data about the average CU. We are saying throw that away, start looking at your credit union and your membership. That still may lead to a card your neighbor is offering, but it may also be something unique. Give your members the options they are looking for."