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When it comes to managing cardholder credit limits, a proactive approach works best. Extending more credit to deserving members when they need it can help inspire their loyalty, keep them transacting and ensure that your cards remain top-of-wallet over the long term. Here are four ways to be proactive with this:
Tip #1: Track—and Match—the Competition Jennifer Kerry, VP/credit card services for CO-OP Financial Services, Rancho Cucamonga, Calif., notes that the credit card industry is highly competitive, which means members are receiving new card offers on a frequent basis. To stay competitive, she advises credit unions to review their lending policies on an ongoing basis. “Credit unions tend to be very conservative when it comes to lending, and this can put them at a disadvantage,” she said. “There are times when it makes sense to relax your credit criteria. Taking a more flexible approach can significantly increase your card portfolio revenue.”
Tip #2: Keep Current Credit Scores To keep tabs on member creditworthiness, Kerry recommends pulling a credit bureau report on each cardholder at least twice a year—and quarterly if possible. “And retain at least the three previous scores for future trend analysis,” she adds. “Invest in data analytics to gain a deep understanding of cardholder activity, and review outside credit bureau data carefully,” she said. “Your competition likely has rooms of analysts tracking data on your members. If you neglect to provide cardholders with plenty of credit when they have earned it, they will quickly become a target.”
Tip #3: Congratulate Deserving Cardholders And whenever you decide to give members a line increase, Kerry adds, celebrate the milestone with them. “Send a letter by mail or e-mail to congratulate the cardholder,” she said. “Use this opportunity to let the member know that you value his or her loyalty—and couple it with your best promotional offer, such as a balance transfer from another card at a lower rate.”
Tip #4: Look for Red Flags While reviewing your portfolio frequently can help you provide reliable cardholders with the right amount of credit, Kerry notes that the process can also help you spot and track potential cardholder issues. “If a cardholder suddenly misses a payment or has two late payments in a six-month period, the credit score will reflect this,” she said. “That member may be experiencing a financial setback. You have an obligation to members and a regulatory mandate to extend credit only to cardholders that demonstrate the ability to pay.”
Bill Prichard is senior manager/public relations and corporate communications for CUES Supplier member CO-OP Financial Services, a Rancho Cucamonga, Calif.-based payments and financial technology company serving credit unions.
