What to Do When Card Volume Isn't as “Joyful” as Usual

Credit Union Journal
December 17, 2008 | COMMENTS

It's the most wonderful time of the year, but credit card usage is expected to be somewhat less "wonderful" than usual, so CU Journal asked cards experts what credit unions can expect this holiday season—and what they can do about it.

"We have seen a decrease in October, but it's single digits," said Dusty Bowers, TNB Card Services' vice president of client relationship management. "So far we expect to see low, single-digit decline in credit card use for the holidays."

Glenn Schectcher, director of credit services for PSCU Financial Services in St. Petersburg, said growth in card use is expected during the 2008 holiday season, but not as much as usual.

"We're certainly not going to be naïve in thinking it's going to be business as usual," he said. "But we certainly don't see the sky falling. We really don't anticipate it to be the gloom and doom that the sky is falling."

Schectcher also expects consumers to use their credit cards more on staple items—those usually purchased with cash—which may also add to the growth.

Bowers said the best thing credit unions can do to prepare to not get burned this season is to maintain fresh credit scores of their card-users "so you know the risks you are taking, including bankruptcy scores, not just FICO," he said. Another strategy is to look at decreasing credit limits for those with inactive accounts, and decreasing the amount that can be used for cash withdrawal.

Now is also a good time to "step up your review of risk-management portfolios," Bowers said. "Ensure they have the right information from their processor."

What to Review with Cards Processor

Among the things credit unions should be going over with their card processors: credit card ratios, purchase and payment trends, risk reports, and any other analytical data available.

Bowers also suggested that credit unions consider tightening their authorization strategies, and increase their early state collection efforts.

"Maybe be more aggressive in that first cycle," he explained, instead of waiting for the second or third cycle.

"Credit unions really need to look at their fee structure," Bowers added. "Fees are primarily used to influence behavior. A lot of credit unions are sometimes too good when it comes to fees. This may be the opportunity to use fees to modify their members' behavior."

From PSCU's perspective, advice consists of finding out where they can give line increases or where they should reduce them.

"We really look at this as an opportunity to shine. The potential for that is there," Schectcher said, based on what PSCU is seeing in its own findings.

Insist on Greater Depth of Analysis

Schectcher recommends credit unions start using more in-depth analysis of their members' card use, including the velocity of charges and the velocity of payments.

"How are they managing their card totality?" he said. "We're working closely with our members to be proactive. We're looking for long-term opportunities. We know it's tough. We also believe this is a great time of opportunity for the industry. If you take a look at the amount of people in credit unions compared to 10 years ago, the number is growing."

Ron Kishen, senior vice president of credit card services for Fidelity National Information Services, the parent company of Asset Exchange, agreed that credit unions will see some reduction in credit card usage, but said there's a lot credit unions can do about it.

"This is a great message we're sending out to them," Kishen said. "It all comes down to approaching it in a very proactive manner."

Kishen said there are still many people out there that deserve credit cards, but are having trouble getting one. Credit unions may be able to help them.

"Their members will appreciate someone giving them credit," he said. Credit unions also have the benefit of being more consumer-friendly, and not always charging the higher interest rates and fees that some other card issuers do.

Less card usage can definitely hurt credit unions, Kishen said, as they will lose that income, "which is why I think they need to be more proactive."

"I think it's a challenging time, but there is an opportunity out there if they do it right," he said.

Studying data about your members' credit card usage is vital, Kishen said. For example, if fewer than 20% of a credit union's credit-card-carrying membership carry the credit union's credit card, that means eight out of every 10 of these members has a credit card from somewhere else.

"If you know what [percentage] don't have your card, get it to them," he said. "Get your plastic in their wallet." However, Kishen stressed, credit unions still need to be smart about it in regards to credit scores, fees, etc.

This article appeared at www.cujournal.com and is reprinted with permission.