Everyone loves a warm, sunny day, but there is a threshold for tolerance before it becomes too hot to handle. As the summer sun cranks up the heat, people seek ways to escape the extreme temperature. People also love the convenience of credit cards and are willing to pay interest to buy now, but they too have a limit on how high you can crank those interest rates up on your card products before they run for alternatives.
In-house credit cards are considered a great way to deliver value and build loyalty among members. They appreciate the convenience of having their card managed by the same institution they trust for their banking needs. Credit cards are also commonly used to cross-sell your products. But mostly, credit cards are awesome at generating revenue for your CU and hiking up interest rates too high can turn your members away. Here are some additional ways to increase credit card income without dialing up the interest rates:
1. Late fee - This is standard practice for most credit-granting institutions and where a large piece of credit card revenue comes from. If the member doesn't pay the minimum on time, they have to pay a fee. This helps encourage on-time payments as well, which is better for your balance sheet.
2. Over-limit fee - This is a fee imposed if the member goes over their limit at any time during the cycle, not just at the end of the month. Some credit card programs assess a higher fee if the credit limit is exceeded a second time in a given timeframe.
3. Annual fee - This is a very common fee assessed on credit cards, and usually are more accepted by members if the credit card program carries significant rewards.
4. Decrease grace days - The grace period is the amount of time you have to pay your balance in full without paying a finance charge. The period usually starts on the first day of the billing cycle and ends a certain number of days after, depending on the credit card issuer. Grace periods are typically between 21 and 25 days. The shorter the grace period, the less time borrowers have to pay their minimum balance before interest charges are assessed.
5. Balance transfers - A balance transfer is great for members looking to pay off the balances on higher interest cards or that want to consolidate their balances, by transferring them to a single credit card account. It is possible to offer a reward, bonus or teaser rate to members who transfer money to a credit card with your CU.
6. Cash advance fees - If your credit card comes with a cash advance option, be sure to assess either a flat fee or a percentage of the cash advance amount, whichever is greater, which is common practice in the industry.
7. Minimum finance charge - This charge is the least amount of interest you’ll have to pay your credit card company in a particular billing cycle when you carry a balance.
8. Offer Credit Life & Credit Disability Insurance - Credit insurance is an insurance policy that you as a borrower can take out to pay your lender at a time when you can't pay. So if you were to pass away, laid off, or become unable to work due to a disability that prevents you from making your scheduled loan payments, credit insurance will repay the loan by making payments to your lender on your behalf.
9.Offer Skip-A-Payment - Skip-A-Payment programs provide members a way to manage special circumstances (unexpected loss of a job or death in the family). It can also be used as a promotional idea, offered in the summer to afford a vacation or during holidays. A fee is added to the account balance on top of the accrued interest for the skipped month.
While your CU needs revenue to continue to operate and support growth, remember what the credit union mentality is all about. CUs are not out to nickel-and-dime their members like big banks, and your card management and card maintenance program should reflect that. You are there to work together with membership for the financial success of all parties involved. If you need to increase revenue with your credit card program, certainly consider using some of these avenues, but set a maximum amount of fees per cycle that won't be exceeded to protect members from feeling like they're at their threshold.