Price Matters

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DES MOINES, Iowa-It's time to leverage that pricing advantage.

Brian Scott of The Members Group here, acknowledged that credit unions are slightly behind the curve versus their banking counterparts when it comes to penetration, but a renewed focus on card products could change that.

"One of the reasons credit unions may have been behind is that they've had a little bit more conservative mentality when it comes to credit cards," he said. "We've definitely seen a trend of credit unions that sold their credit card portfolios and are now getting back into the business. Credit unions are starting to realize there is a lot of value in a credit card portfolio and they are starting to spend more time on marketing those portfolios."

Despite pricing cards with lower APRs than many competitors, typically at 9% to 11%, credit cards still provide a much higher yield than auto or home loans that are in the 4% range today, reminded Scott. The current environment could provide CUs with a unique opportunity to capitalize on disruption in the marketplace stemming from regulatory changes courtesy of Regulation E and the CARD Act, he believes.

"Even with regulation changes, I think credit unions are still ahead of the curve with what their rates and fees are compared to the rest of the industry," said Scott.

While many consumers are cutting back on traditional use of credit, they are still using cards frequently, Scott pointed out. Consumers may have changed behavior and ceased using cards to finance big-ticket items, he suggested, but many have also turned to plastic for day-to-day transactions and payments, relying on cards to work as financial management tools.

Still, most individuals using cards "might be carrying a smaller balance, but they still aren't paying it all off every month," Scott noted. Balance transfers from banks also provide value to both the credit union and the consumer, he added. Scott suggested CUs look at adopting rewards programs that focus on the issuer by offering breaks on penalty fees, rate cuts on other loans, or boosting rates on deposit products to increase adoption and use of card products. "Those kinds of thing really drive value back to the credit union has been very successful," he said.

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