LOMBARD, Ill.-Credit unions in 2009 increased their credit card balances, but owe the gain as much to banks' tough card policies as much as aggressive CU marketing.
Several card processors told Credit Union Journal that CUs made strides on the credit card side, while saying debit is a much tougher call. Numbers clearly show the shift in credit card balances to credit unions away from banks, according to Bill Handel, VP of research and development at Raddon Financial Group here. "If you look at some of the national data you'll see there has been a precipitous decline this year in revolving credit balances in the entire financial system."
But while Handel said overall balances have fallen from close to a trillion dollars down to about $900 million, he pointed out that credit unions this year have consistently grown their revolving credit balances - up to $34 billion from $32 billion. "That shows what credit unions are doing," he said. "Card penetration is not changing that dramatically. That number moves slowly. But credit union balances are increasing."
Help from the Banks
Handel attributes that to credit unions being more aggressive, but more so to consumers putting away their skyrocketing-rate bank cards and moving the CU credit card to No. 1 in their wallets. "I think credit unions have benefitted a great deal from that," Handel said.
The Members Group has been seeing activation rates increase within its credit card portfolio, which confirms Handel's assertion. "Members are starting to use their credit union cards instead of keeping them as backups," said Jeff Russell, VP of strategic development for the Des Moines, Iowa-based TMG. "They are saying forget the big bank. I am going back to my credit union because I know who they are and I trust them."
Glenn Schechter, director of credit services for the St. Petersburg, Fla.-based PSCU Financial Services, said the business is not all courtesy of the banks and that CU promotion of their cards is up. "I think credit unions have learned that this is the time to communicate. Just in the Tampa Bay area you see many more credit union billboards."
Big Opportunity in Debit
In Rancho Cucamonga, Calif., CO-Op Financial Services' CEO Stan Hollen believes that credit unions have done a good job capitalizing on the opportunity to increase overall card penetration, and expects that will continue into next year. But the biggest chance to grab business, he predicted, is with debit. "Of all the checking accounts in the financial industry, about 52% have debit cards. Credit unions are probably a little better than that. But that still means there is a dramatic amount of growth available. It's a great opportunity."
Bill Lehman, VP of portfolio consulting for CSCU, contends that many credit unions are missing the chance to build their card base. Numbers from CSCU's card portfolio show a decline this year over last for credit in both volume and usage-12% on dollar volume and 7% on transactions.
"It's a missed opportunity," said Lehman. "This year some credit unions have become hesitant and got a little scared, and rightfully so with the economy. But the credit unions that recognized this window of opportunity with their card base have been extremely successful. Those who stepped on the gas instead of the brakes have acquired a very strong number of accounts."
