At a time when many credit unions are selling off their credit card portfolios, a decision by Suncoast Schools FCU to redouble its credit card efforts has led to some remarkable results.
SSFCU is reporting that outstanding balances grew 35% to $233 million in 2003 and in the process the credit union emerged as the nation's fifth largest credit union credit card issuer as of year-end.
"We had a successful credit card portfolio previously, and it was a valued and valuable product," said Linda Darling, EVP and CFO of SSFCU. "But in the late 90s we went through a no-growth time, so we knew we needed to look at what we could do to reinvigorate the portfolio."
It is just that scenario that has led to the sale of many card portfolios by credit unions. So did Suncoast consider selling its plastic? "Not ever in the least bit," Darling commented. "The credit card is a good product. Everyone carries at least one credit card, and typically it's more like two or three. It's a product your members are going to use, so why not use yours. Plus, you can control it and not do things like jack up rates or increase fees. The credit card is a very valuable product in terms of its contribution to the bottom line and it's very 'sticky.' I don't understand why anyone would ever sell the credit card portfolio."
For Suncoast Schools, the question, said Darling, was how to jump-start growth? For answers, it turned to its processor, PSCU Financial Services to help it revamp its credit card offerings.
"We looked at how the rates changed and lowered our rates across the board," said Maria Garcia, SVP-automated services. "We changed the design of the cards themselves, removing some of the clutter and creating a simply elegant card. Then we sent out fresh new cards."
And the power of "fresh new cards" shouldn't be underestimated. "We have a relatively short two-year expiration for the same reason," Garcia explained. "There is something to be said for a brand new card. It sort of reintroduces your card to your member and reminds them to use it. A new card is more likely to be found at the top of the wallet."
Among Other Strategies Used
* No annual fees except on Platinum Rewards.
* Separate out the Platinum Rewards card from the others, because rewards are a retention tool.
* Lower the percent of the minimum payment from 3% of the balance to 2% of the balance.
* Keep up (or down) with moving interest rates. "Rates were down over all, yet most had not lowered their credit card rates," Darling noted. "We saw an opportunity there."
* Keep the faith. "We offered promotional rates for transferring balances, but we didn't make that just an introductory rate that jacked back up after the promotion. That rate stays until the balance is paid in full," Garcia commented. "We're not about pulling one over on our members," Darling added. "We don't want to lose that trust."
* Automatically upgrade credit lines based on Beacon scores (and of course, send out a new card when that occurs).
* Tie overdraft protection for the checking account to the credit card, allowing the members' credit card to cover any overdrafts.
* Take advantage of partnerships. In addition to working with PSCU Financial, Suncoast also teamed up with Raddon Financial Group to get a usage analysis and other important data on its portfolio.
Suncoast also learned a valuable lesson about how conservative CUs are compared to the overall card market. "We realize we'll take more losses on our credit cards, but when you compare credit unions to the big national issues, we are much more conservative," Darling offered. "You have to look at the big picture."
The credit union also beefed up its marketing to match the new and improved card portfolio. To back all these efforts up, Suncoast educated its staff about the credit card product so they would be able to answer all of a member's questions about the product and sell, sell, sell.
"When you get employee buy in, they get excited and come up with ways to sell," Darling suggested. "We take a team approach."
To help employees along, the CU set up a system so that when a member opens a new account, the member is automatically approved for a card based on his credit score. That information appears immediately on the member service representative's screen, and prompts the MSR to inform the member about the offer and the type of account for which he or she is qualified.
Suncoast offers a classic, gold, platinum, platinum rewards, student, teen, and secured cards and a card tied to the home equity product.
For the future, the CU, with more than $4 billion in assets and 335,000 members, is looking at extending its rewards program to all platinum cards and is beginning to start more mass-media type marketing to bolster membership growth while it continues its targeted marketing for credit cards.
"We are finding we have to start advertising," Darling related. "We're experimenting with billboards. It's costly, but we do need to do it for growth."
But the portfolio isn't hurting. "I just met with our ALM consultants, and they showed a growth of $5 million the first quarter, when most are seeing no growth or negative growth in the first quarter."
