Strengthen It And They Will Come
 In the movie "Field of Dreams," Ray Kinsella heard "if you build it, he will come," and his dream of building a baseball field on his farm paid off. For Smart Financial Credit Union of Texas, the strategy was "if we rebuild it, they will come."
What Smart Financial rebuilt was its credit card program, and the credit union’s efforts have succeeded very well in the two years since it completely revamped the program.
It all started in mid-2005 when the Houston-based credit union, with nearly 74,000 members, began working with TNB Card Services’ Portfolio Management team. Smart Financial, a longtime client of TNB’s processing services, was looking to pump up its credit card program, improving the program’s structure and profitability as well as its card’s appeal to members.
Smart Financial, founded in 1934, serves some 300 select employee groups as well as individuals who live, work, or attend school in Fort Bend, Harris, and Montgomery counties in Texas. Harris County (Houston) is Texas’ most populous county, and the third most populous county in the country. The credit union has assets of more than $350 million.
"Before our conversion to our new program, we had previously issued a classic, a gold, and a platinum card in both MasterCard® and Visa®," said LeAnn Kaczynski, senior vice president and CFO. "We decided we would move forward with only a Platinum MasterCard card, with a minimum of a $2,000 credit line."
As part of its overall program upgrade, if cardholding members didn’t qualify for that platinum card, Smart Financial let their accounts lapse at the expiration date.
Smart Financial also moved to risk-based pricing to remedy some of the inconsistencies of its previous pricing where rates did not correlate well to credit scores. Now, the lowest-risk cardholders enjoy an interest rate of about 8.49 percent, while highest-risk cardholders see rates up to 17.79 percent.
"Our new rates and new program have been very well received by cardholders," said Kaczynski. The credit union itself has also welcomed the results the restructured program has yielded.
For instance, the average outstanding balance is nearly $2,700; net income for 2006 was well above 2005 and previous years; the average credit line is more than $8,500; and the credit line utilization rate is showing strong growth, rebounding from the low point that occurred when Smart Financial significantly raised credit lines.
This year, Smart Financial is focusing on increasing its card program’s penetration among members through a TNB Balance Transfer Promotion and a number of in-branch promotional activities, and is looking into adding a rewards program.
"Risk-based pricing made our product more competitive, and as a result, overall balances have grown. The bottom line is that we have a stronger card product and our members are using it," said Kaczynski. |
