ARLINGTON, Va. – Credit union card marketing efforts are going to have to be more intelligent, more segmented and carry more bonuses in the future as more credit union members roll their credit card balances into refinanced mortgages and face a sharply lowered stock market and uncertain economic times, according to a mix of both credit union and government financial experts. "Credit unions are absolutely going to have to know the demographics of their members who hold their credit cards," said Katy Slater, manager of product development for PSCU Financial Services. "We know from surveys that the number of credit cards in people's wallets are falling. Now they are only going to have two cards in their wallets, and credit unions are going to have to fight to make sure that theirs is the one the member reaches for." Slater said demographic knowledge was going to be key because every member is not going to have been able to refinance their homes to draw down their credit card balances and may still use their cards. In general, higher income is the first factor driving credit card usage and then age, with younger demographics needing or wanting to use the cards more than older members. According to a statistic collected by debtsmart.com, a credit management Web site, cardholders between the ages of 35 and 54, when income is among the highest, have card balances 5% over the national average. One key, she said, will be the use of what have come to be called "flexible rewards programs" which are more tailored to the members' priorities and thus can motivate a member to use their card more often. "Everyone recognizes the airline miles bonus programs," Slater said, "and September 11 knocked them for a loop because nobody wanted to travel afterward. But flexible reward programs allow members to choose the benefits they want." Slater said that even though miles bonus programs are still reeling from security concerns, other travel bonuses are still attractive, including discounts on hotel and motel use, discounts in restaurants and other sorts of travel related perks. Other innovative programs include merchant discounts and bonuses, merchandise "that people really want" and cash back programs are still popular, she added. The lack of bonus programs that people want might account for a survey published by Cambridge Consumer Credit which found that only about 25% of consumers said that a card's bonus or rewards program influenced whether they used their cards. Member benefit programs that credit unions have begun implementing can both help stimulate card usage and help link the member even more closely to the credit union, Slater said. In these programs a member earns points for credit card usage that he or she can use in other parts of their credit union relationship, for example to cut the interest rate on a car loan or to cut down on the points they might pay if the want a mortgage. "The point is flexibility, to get the member to buy into using the card," Slater said. Slater said credit unions need to understand why their members use their cards. For example, cardholders that use their cards frequently are often more open to rewards programs. Frequently they are not revolving their card balances from month to month and use the credit card primarily to make purchases without having to make frequent entries into their checking account ledger. They use the grace period and pay off their balance with one check a month, she said. Those users in particular are more open to using a rewards program than users who might use their card only for larger purchases, she added. One way financial institutions that have had a generally conservative credit policy, like many credit unions have had, can increase future credit card usage would be to allow their cardholders to have more credit, according to a Federal Reserve official who said the Federal Reserve rules precluded him from speaking on the record. He cited surveys and studies which showed that consumers with even very conservative credit card use habits, if granted greater credit, will wind up with higher balances six months after getting the additional line of credit. "I know it sounds obvious," he said, "but really it is a bit like the line `if you build it, they will come'," he said. He added that a credit union would have to be careful how it did this, but added that if a customer or member had a good history with the credit union or bank it would probably be OK. And he agreed that continuing to market credit card usage is liable to be a challenge. According to Federal Reserve survey data, outstanding revolving consumer credit has been either flat or actually falling at banks and credit unions. Consumers' outstanding revolving credit at banks is preliminarily down from $221.3 billion in April to $218.3 billion. At credit unions, members' outstanding revolving consumer credit remained flat at $20.9 billion after hitting a high of $22.3 billion in the fourth quarter of 2001. But CUNA economist Mike Schenk linked credit card trends to consumer spending which, he noted, often peaks before a recession arrives but returns as the economy improves. He doubted credit union members would by and large stay away from using their credit cards. [email protected]