Is It Time To Sell Your Credit Card Portfolio?

Many financial institutions both large and small are evaluating the merits of continuing to hold their own credit card portfolios. As the cost of competing in this sophisticated market, combined with the cost of fraud in both losses and increasing insurance premiums and escalating deductibles rises - now is the time to seriously consider capitalizing on the unrealized premium your financial institution has built.

There are many reasons to consider divesting of your credit card portfolio; a few of them are as follows:

Are liquidity needs forcing you to buy high cost money?
Are you losing A+ and A cardholder balances to more attractive offerings?
Have you seen trends of escalating losses in your portfolio?
Are you using valuable marketing dollars that would be better used for other services?
Have your members been asking for costly points programs and alternative card choices?
Could your staff's time be better utilized in other loan programs and customer service areas that generate more to the bottom line?
How can this be a better solution for my membership?

Your customer base will receive card choices such as Platinum, Gold and Classic cards. Many credit unions today simply offer a single solution. Rewards programs that offer points or cash rebates. Consumers demand something extra for using your card vs. a multitude of other offers.

Family accounts provide for credit lines for family members at a very young age, thus teaching credit responsibility and helping to build that very important credit score. Advanced Fraud protection services, to protect the member and the financial institution. Large Call Centers that are available 24/ 7/365 and speak in multiple languages. How does my credit union benefit?

Potentially receive a premium on the portfolio that enhances undivided earnings and benefits all members. Eliminates marketing expenses for credit card product which in many instances is in decline. Provides for competitive credit card solution with financial institution? name on card that better meets the needs of your customer base. Provides for ongoing revenues for financial institution through card sales and card interchange income.

Potentially reduce labor expense by moving all card related customer service to partner organization. Frees up staff to work on other service areas that promote the long term health and viability of the credit union. Allows financial institution to reinvest dollars currently invested in card portfolio into secured loans.

When does it make sense to keep my Portfolio?
When you have significant liquidity (loans to shares 70% and under). When your effective yield on the portfolio is significantly higher than other possible loan or investment options.

When your credit card portfolio is growing and not stagnant or shrinking. When you are able to provide the features and functionality that your members/customers are seeking. When the yield out weighs the risk.

Summary:

Having worked in the financial industry for some twenty-five years in both commercial banking and credit unions, I have experienced a number of economic cycles. What provides me with greater pause than any of the economic cycles I have seen is the impact of the internet and the vulnerabilities and exposure that we experience as financial institutions and as consumers.

When Banks with millions or billions of dollars in assets choose to divest of their credit card portfolios I take note.