Re-engineering Of Card Portfolio Now Paying Off
Credit Union: GECU
Nominated by: TNB Card Services, Dallas
Nominated For: Management of its Card Program
Sometimes low product or service performance leads to a re-engineering that both improves growth and take that product to a new level. That's what GECU of El Paso, Texas, discovered with its credit card portfolio.
"We decided a few years ago that our credit card portfolio losses were just too high," says Harriet May, GECU's CEO.
Thanks to the usual member maladies-divorces, bankruptcies and other personal crises-losses had escalated at an alarming rate. By June 1999, accounts receivable for the cards had dropped from a high of $47 million two years before to a low of $38 million, and was continuing to decline.
GECU could have unloaded the portfolio to another vendor, but that wouldn't have adequately served the $910-million institution's 225,000 members, May says.
"We decided it was time to take ownership of the problem," says May.
Working with TNB Card Services, a division of the Texas Credit Union League-owned Town North Bank, Dallas, GECU began streamlining and modernizing its card program.
Lines of credit were added and the program slowly turned around. GECU also took advantage of TNB's marketing and promotional services, which gave them greater presence and penetration in the highly competitive El Paso market, says May.
GECU started charging for overdrafts, which generated fee income. The credit union also aligned its ATM card with its debit card in 1996, which increased usage significantly.
May says GECU was one of the country's first credit unions to introduce a debit card in 1984.
Market penetration and usage was slow until the alignment seven years ago, which helped card usage grow significantly. The same may be said for the whole program.
"It took some time, but now it's one of our best performing portfolios," says May.
One of the card program's newest features also promises to be among its most valuable.
Through TNB the credit union now offers the MasterCard Family Account, which allows different individual users to draw on the same credit card account, much the same way cellular phone "family plans" operate, says May.
Parents can give children cards and monitor spending limits under the plan. Individuals can be separately billed for their purchases or all can be included on one master bill sent to the parents, who remain the primary cardholders no matter what variation of the plan is followed.
"This is a way for parents to help monitor their children's spending and keep track of where that money is going," says May.
One of the best developments has program elements operating in reverse, says May.
In some families, it's the adult children who take out the card and provide ancillary cards to parents first learning to use credit card. In fact, education is a key aspect of everything GECU tries to do for its members, May says.
"The Family Account gives a reason for parents to teach their kids about money," says May.
That training will make young people smarter consumers and help keep them out of money trouble as they age, May says.
The credit union seems to be on the right track as demonstrated by an accounts receivable increase for the card portfolio to nearly $56 million in August 2003.