Rewards Programs Do Pay Off, EECU Finds
Proving that a well-run rewards program definitely pays
off for a credit union, EECU is now reaping the benefits
of the program it launched in early 2005.
EECU, based in Fort Worth, Texas, worked with TNB Card
Services to establish the rewards program in February
2005. At the time, explains Keith Spivey, vice president
of payment systems, the decision was made to enroll all
new cardholders into the rewards program automatically
and enroll existing
members only upon request. The rewards program was
instituted as part of a
move to risk-based pricing.
The approach has served to control membership in the
rewards program
somewhat, but EECU’s experience over the past two and
a half years shows that
a rewards program does indeed provide a "lift" to a
credit union, with increased
spending and usage by cardholders, and a significant
growth in outstanding
balances.
The more than 1,400 rewards-eligible credit card holders
use their card 30
percent more often – 5.7 times per month, compared
with 4.4 times per month for
non-rewards members. The latest figures also show that
the average rewards
cardholder spends 20 percent more per transaction, or
$72.80, compared with
$60.36 per transaction for non-rewards users.
Generally, rewards program cardholders also use more of
their credit line.
EECU’s standard cardholders in the rewards program use
60 percent of their
credit line, compared with 36 percent for non-rewards
cardholders, and
MasterCard Gold cardholders in the program use 48
percent of their credit line,
compared with 26 percent for non-rewards Gold
cardholders.
"The rewards program is working," Spivey says. "As
I compare our portfolio
as of July 2007 with October 2006, our outstanding
balances are up nearly a
million dollars or 7.5 percent."
He adds, "The rewards clearly add benefits, and with
the combination of
rewards and multiple card products priced appropriately
for the individual, it
makes our credit union more attractive. Even with all
the credit card offers our
members receive in the mail, they’re less likely to
leave because they see the
value in staying with us."
For EECU rewards cardholders, the most popular aspect of
the program is
the flexibility that TNB builds into the travel rewards,
Spivey notes.
"Everybody likes the travel awards," he says, since
the program offers
completely unrestricted airline, hotel, and car rental
travel options, including
cruises. While some people redeem rewards as soon as
they hit the minimum
point balance (recently lowered to 2,500 points), others
are more patient, saving
for big-ticket merchandise or travel.
EECU, which has more than 100,000 members and more than
$637 million
in assets, promotes its rewards program through
in-branch posters and
brochures, through the credit union newsletter, and in
connection with semiannual
account acquisition promotions that it runs with TNB.
The credit union
serves five counties in the Fort Worth area, as well as
specific cities and a large
number of employee groups.
Building on the success of the credit card rewards
program, EECU is
looking very seriously at adding a debit card rewards
program, Spivey says, and
may also expand the program to include relationship
rewards, giving points to
members who take advantage of a range of EECU products
and services.
Building on lessons EECU has learned, Spivey’s advice
for other credit
unions embarking on rewards programs is to consider
adding rewards to both
your credit and debit products. "A strong rewards
program will help you attract
new members and retain your existing members," he
says. |
