Revitalizing Balance Transfers
September 11, 2018
Northwest Credit Union Association Strategic Link business partner, SimplyCredit, has effective advice for credit unions on how they may implement successful balance transfer campaigns.
SimplyCredit helps to simplify and enhance credit access for Main Street businesses. To learn more about this valuable business partner and find out how your credit union may use their services, visit SimplyCredit online.
The typical balance transfer campaign is expensive and rarely results in a long-term change in member credit card usage, according to SimplyCredit.
Credit unions must change their concept of the balance transfer in order to deepen relationships and acquire sticky balances.
According to the Federal Reserve, U.S. credit card debt amounts to over $1 trillion, more than $3,000 per man, woman, and minor nationwide. While credit unions offer low rates and dependable service, their share of the business is fractional.
Credit unions are not alone in this regard. Of the thousands of card issuers, the top 15 control 93 percent of all balances. Absent any other data, it would be easy to assume that cardholders are immensely loyal to large issuers, but nothing could be further from the truth. Credit card companies account for some of the lowest Net Promoter Scores of any industry.
The incongruity can be explained by the impact of rewards. The six largest credit card companies spent $28 billion in rewards last year and have created programs that are difficult for community lenders to duplicate.
It is impossible, for example, to offer 2 percent cash back and rely on interchange fees alone to make the program work. Many credit unions resort to balance transfer promotions to encourage participation, but the campaigns are expensive, often requiring costly analytics and direct mail. Furthermore, the transfers lack stickiness, as members increasingly pay off balances prior to special-rate expiry.
Whether for airline miles, cash back, or other benefits, the majority of members will use national brand credit cards for their favorite rewards no matter how clever a credit union’s promotional event. An effective growth solution, therefore, must acknowledge this behavior and not require a fundamental change to it.
Automation that informs members of available savings and gives them control over the sweeping of balances is a proven path to success. Tools offered by SimplyCredit, a Northwest Credit Union Association Strategic Link business partner, are extremely sticky. In an average month, one-third of users schedule balance transfers to credit union partners without the need for costly promotions, paperwork, or human interaction.
As a result, members get the rewards they love, but achieve a lower rate on their debt. Other advantages include the following:
- Members save money — often thousands of dollars a year — and gain control over their personal finances with educational support and tools disseminated through online channels.
- Credit unions grow card balances without offering deeply subsidized promotional APRs andcounteract the disruption caused by competing consolidation offers made by online lenders and credit card issuers.
Want to find out more about SimplyCredit during the MAXX 2018 convention in Tacoma, Wash.? Visit them at the Tradeshow’s betaSpace Oct. 16-18.
Posted in Strategic Link.