As the article continued with various and sundry items about credit cards, it concluded with the fact that credit card debt in the U. S. has reached $1 trillion, with the average household having $9,840 of this kind of debt (compared with $2,966 in 1990).

I was visiting with my friend Tony, here at TMG, about this, asking if he was above that average and if he could pick up the slack since I was below that average. Just a joke, just a joke. But on a more serious note, he commented on how ironic that [credit unions issuing credit cards] was.

We (credit unions) are promoting the very product that has brought so many consumers to the edge – in many cases over the edge – of financial well-being.

He went on to suggest that maybe we (credit unions) should begin a campaign to educate and promote responsible credit instead of just promoting the use of credit. An interesting idea indeed. I’m sure there has to be some of this going on out there, but probably not as much as there needs to be.

How does your credit union promote credit cards to your members? Do you incorporate responsible credit education into your promotions?

1. People habitually spend more than they make

and

2. People buy products and services based on WANT rather than on NEED.

Spending more than you make is largely a product of easy and readily available credit.

Buying what you want vs. what you need is a discipline issue fed by a dazzling array of the latest and the greatest things that everybody else has.

These two behaviors are pretty prevalent today and much in need of being modified. If they are, and the subsequent changes made are turned into savings, two things would be helped:

• high consumer debt levels would be lowered
• low consumer savings levels would be raised

I believe that credit unions are agents to help bring about this modification.

Credit unions are in a unique place to help consumers with some of the basics of prudent financial management, such as budgeting, balancing a check book, savings and responsible credit use. All of these things are basics that many of today’s consumers have forgotten in the rush of excitement during the years of plenty (the 90’s thru mid 2000’s). Or, in many cases, never knew well, if at all, because they were never taught.

So, credit unions, read the article, “10 Mistakes…” and be better prepared to know how to interact with your members. Know the right questions to ask them as you are helping them get on a prudent financial course of behavior.

Jim Jerving says that like death and taxes, you can count on two things in the financial services industry - the escalating costs of compliance and technology. Jim turns the discussion to our own Jeff Russell to talk about how collaborating with CUSOs can bring down the costs of technology for credit unions.

“We are an aggregator, we purchase technology directly from the best of breed providers, so we have the advantage of large purchases and economies of scale,” said Russell. “However, we don’t run a core processing system so we have to work to integrate our processes and products into the credit union’s core. Our products are ancillary - not shares and loans - so we have to work with lots of systems. We bring the costs down per installation by designing it on the front end.”

Aside from helping diffuse technology costs, the collaborative process also fosters innovation and fraud prevention among credit unions. TMG has hosted webinars and events that bring credit unions together to discuss issues and solutions, allowing everyone to benefit.

Although collaboration has it’s benefits, it is still the exception in the industry. Changing mindsets to get more credit unions to collaborate is often a difficult process.

“In our business, we have to win partnerships one credit union at a time. We have to be competitive with other providers, yet collaborative in our approach,” said Russell. “One way I look at collaboration is through participating with a group of CUSO leaders who meet monthly to discuss ideas. We don’t always agree, but we have free-flowing ideas about the future of credit unions and CUSOs.”

Are you collaborating to keep the costs of technology manageable? What other benefits have you seen from collaborating amongst your peers?

Please leave your thoughts on our blog or over on the original NACUSO post.

The page I found most interesting was the listing of the top 50 credit unions in the U.S., ranked by assets and members. Based on hard facts and numbers, this list ought to be less controversial than Bancography’s top credit union brands list.

If you work for one of these credit unions, you probably already know your position, but this is a great resource for everyone else.

Top Six Credit Unions by Assets

1. Navy Federal Credit Union
   Merrifield, VA. $35.3 billion in assets.
2. State Employees Credit Union
   Raleigh, NC. $15.9 billion in assets.
3. Pentagon Federal Credit Union
   Alexandria, VA. $11.9 billion in assets.
4. Boeing Employees Credit Union
   Tukwila, WA. $8.4 billion in assets.
5. Orange County Teachers Federal Credit Union
   Santa Ana, CA. $7.8 billion in assets.
6. The Golden 1 Credit Union
   Sacramento, CA. $6.7 billion in assets.

Top Six Credit Unions by Members

1. Navy Federal Credit Union
   Merrifield, VA. 3,050,981 members.
2. State Employees Credit Union
   Raleigh, NC. 1,446,228 members.
3. Pentagon Federal Credit Union
   Alexandria, VA. 801,878 members.
4. The Golden 1 Credit Union
   Sacramento, CA. 690,605 members.
5. Security Service Federal Credit Union
   San Antonio, TX. 653,664 members.
6. Boeing Employees Credit Union
   Tukwila, WA. 542,748 members.

See the top 50 credit unions in each category on Credit Union Access.

I don’t think the Celtics being on top (although that is very good thing), other than being a momentary diversion, is going to have anything to do with “all is right with the world”, or a bringing of any solutions for the challenges we face today.

Although I do kind of remember it as such in that era – in the basketball world and in the world at large. Why is that do you suppose?

Probably because of the sense of prudent fiscal responsibility that most folks carried on their business with. They didn’t take undue risks, beyond their capacity. And, they didn’t have easy and ready credit to tempt them.

Their integrity lined up with their values, something we hear so easily slide off the tongue of so many today, only to find out that the words aren’t worth the spit it took to say them.

So what does that have to do with finance and credit unions and banks? I think we can take a few lessons from the past, in particular from some of those basketball greats.

They worked hard; they worked hard a lot - over an extended period of time. It took a lot of discipline, looking to the future, the long term, even when there were temptations to take shortcuts. They pulled together, as a team; they helped each other out. And look what it did for them – they won championships! The Celtics became the most storied basketball team in history.

Credit unions have similar character traits to lend to society, and boy do consumers need a dose of some of that today. And they need some hope, too. Credit unions, don’t grow weary in doing good! Look what it did for the Celtics.

Christopher Morris Suggests Developing New Ideas

Christopher Morris, CUDE and Web Manager for CUNA Councils recently responded to an email on the DE (development educator) listserv about this very issue of savings.

His comments started off noting that the savings rate in 2006 was -1%, the lowest since the Great Depression. And, young adults are part of that negative trend. They are not saving as much as they should, but instead are simply spending and borrowing more.

Morris noted that 61% of young adults cited “lifestyle purchases” as an impediment to savings. University administrators state that they lose more students to credit card debt than to academic failure.  And all the while,  millennials are the most socially conscious consumers to date.

The question asked and being studied is, “How can credit unions appeal to young adults to save money in a way that is meaningful, fun, exciting and rewarding?”

Christopher’s 30 Under 30 group is working on an idea of offering prize-based savings for young adults with a charitable spin.

Could Prize-Based Savings Be the Answer?

Prize-based savings accounts with prizes and messaging tailored to young adults. Everybody wins! Prizes for the young adults are tuition assistance, free food for a month, iPods, etc.  A prize of a similar dollar amount is given to a local charity of the young adult’s choice (selected when they first open the account).

Studies have found the prize-based incentives can be compelling, particularly for young adults. The approach described above is simply a win-win-win savings opportunity. The charities of choice win, the members win (they get prizes and they get to help their favorite charities) and the credit union wins (they see member and deposit growth).

Other DE’s have chimed in with prize based savings programs they have initiated and implemented and the results have been very good.

It’s a lot to think about, but deposit growth is a must if you are going to be around in the future.

Comments? Thoughts?

UPDATE: Chris is also continuing this conversation over at the YES CU Blog, which talks about issues CUs face when serving members in the 18-to-30s range. Stop by and give them a look. We hope this sparks some more great discussion on this topic.

As an issuer, this is an important change to be aware of for a couple of reasons:

1. PIN-less debit transactions will pay significantly less interchange to the issuer.
2. Merchants will likely start offering these payment options more aggressively to lower their costs of transaction processing.
3. Issuers have options available to limit the number of transactions that are processed through PIN-less debit.

Right now, I don’t view PIN-less debit as much of a threat to issuers for a few reasons:

1. Issuers have to “opt-in” to allow their cardholders to use PIN-less debit at merchants.
2. More than half of debit issuers offer rewards on their cards which incents cardholders to sign for transactions.
3. Merchants have to disclose to the cardholder their intention of routing a transaction through a PIN network versus the card association.

Regardless of those hurdles for adoption, as an issuer, it’s important for you to be thinking now about how you secure your cardholders’ loyalty and transactions through signature debit.

I spoke at the TMG Client Conference recently about ways to increase your cardholders’ usage of signature debit. A couple of the ideas that I shared are to:

1. Offer debit rewards. The economics of doing so are nearly a can’t miss.
2. Focus more than ever on gaining market share and new accounts.
3. Continue to market your advantages, track the success of your marketing efforts and require a positive return from every marketing dollar.
4. Educate your cardholders about the advantages of signature debit and what traps to avoid at the checkout line.

In his initial statements he was talking about a “startup” company and taking a long view of its place in the world if it is to succeed, especially in a recession. His view of the best way to achieve this is to “focus on doing good, in addition to doing well.”

Credit unions, that is us. This goes for whether you have been around for a year, a decade, or even several decades! We do good!

The big question is what does it mean to “do good and do well” in today’s world?

One of the main topics of the article is a counter-intuitive, but good point. In a declining rate environment, while others are cutting interest rates on their cards, credit union cards are remaining relatively flat. So when the large issuer cuts their interest rates, how might this be good for credit unions and their ability to compete? It’s not an easy positive to see!

In my mind there are two advantages to the current rate environment:

1. Many banks are lowering their rates while increasing their fees and penalties to keep net income high.
2. Your current rate is still competitive in the marketplace so you can keep your spread high and still be competitive.

The big question with both of these is still, “Ok, so how do I compete?”

Emphasize Your Stability

Make it a point to emphasize that while large issuers are constantly changing their rates and fees, the credit union (typically) is not making those same frequent adjustments. Fees and penalties are the bane of many consumers so tell good stories about how your rates and fees compare to other issuers. Be an open book for your members with nothing to hide; make it evident that you won’t be taking advantage of them when rates start to climb. Better yet, guarantee that you won’t change your rates or fees for at least two years (or some other extended period of time).

Provide Education on Your Programs

The point is to make sure you are providing the education about your programs that your member needs to hear. Educate your staff on how to effectively communicate the value of your card and the potential traps that are out there. Teach your staff and your members how to compare different card offers.

Market Your Card Programs

Finally, remember that most often your card program is your highest returning asset. Just because it’s not the largest part of your lending portfolio, don’t forget to market it as heavily as you would an auto loan. Every dollar that is lent out on a card returns double the same amount of an auto loan!

An important aspect of Web 2.0 that many people talk about is being more transparent to your audience. This means being honest and open in everything you do, explaining who you are and your intentions.

Blogs and social media have been a great way for credit unions and other financial institutions to open up these channels to their audiences, blogging about what they are doing, issues that concern them and fielding feedback.

America First is Using Ratings and Reviews

America First Credit Union of Utah has taken the concept of openness even farther with the recent implementation of user reviews for their website. Every product or service that America First offers is open for discussion, rating and review by its members.

America First leads into the discussion by stating:

“At America First, we value our members’ opinions.”

What better way to show that to their members than to open themselves up for criticism and commendation?

At this time, only AFCU members can post reviews of products (and rightfully so in my opinion). The credit union also lists a set of guidelines that they ask members to abide by when posting reviews. It asks users to refrain from using obscenities, personally identifiable information like social security numbers or physical addresses, and all the other legal mumbo jumbo, but nowhere do they say that members can’t leave negative reviews. In fact, they encourage it, and so it should be in a situation like this.

If you flip through the different products and reviews that have been left so far, there are some negative reviews (usually citing an issue the user had) and ratings with less than five stars, proving that these are not doctored or falsified. America First asked for their members’ opinions and they responded.

In the world of social media, companies and people have realized that receiving the bad feedback along with the good is actually beneficial because it provides an opportunity for improvement and possibly even further discussion.

Now that the bar has been raised, how are you showing members that you want to hear their views and opinions?