ARLINGTON, Va. – When a bank purchases a credit union card portfolio it frequently reviews the credit card accounts of current cardholders with an eye toward increasing the card limits. This is because credit unions, in general, are known for having card portfolios that are not being used to their potential. PSCU Financial Services hope it can get credit unions thinking about adjusting members' limits. It's no great secret that credit unions are very cautious about underwriting generally and credit card loans in particular, said Brian Crawford, Chief Marketing Officer for PSCU Financial Services. PSCU is the firm based in St. Petersburg, Florida, that serves more than 500 credit unions that process their card transactions with Denver-based First Data Resources. “It may be that many credit unions' caution about their credit card limits may be hampering their portfolio growth,” he added. The tight fist that some credit unions keep on their cardholders' credit lines is a problem, Crawford and other industry executives argue, because the practice effectively prevents the credit union's card from winning the coveted “top of the wallet,” status. Top of the wallet cards are those the cardholder will reach for first when making a card purchase, whether because of the cards' interest rate, rewards program or availability of credit, the so-called “open-to-buy” in industry parlance. A credit union card could have a great interest rate, a decent rewards program and a measure of credit union member loyalty, but all that will come to nothing if the credit union member thinks the card's limit has been reached. The problem is made worse, Crawford explained, because of some credit unions' misapprehensions of cardholder behavior. “Some credit unions still believe that cardholders will stop reaching for a card when they reach their limit,” Crawford said. “But research has shown that most cardholders will stop reaching for their card when they have reached 75% of their limit, because nobody wants to face the embarrassment of a purchase decline.” To begin to counter this problem, PSCU launched a program called Credit Limit Increase Solution in July of last year. The program seeks not so much to convince credit unions to change their underwriting criteria, Crawford explained, as much as to streamline the process credit union cardholders have to go through in order to increase the limit of their cards. “We use the underwriting criteria the credit union gives us,” Crawford said. “If the credit union wants to limit increases to those cardholders who have never had a late payment, that is the criteria we will use. If they choose to limit credit increases to cardholders that have gone eight months without a late payment, that's the criteria we will use. It's up to the credit union.” But by joining the PSCU program, Crawford said, credit unions can proactively reach out their members about their credit limits, rather than wait for the member to use the customary channels, which can include filling out forms, interviews with loan officers and taking too much time. In the Card Limit Solution, a participating credit union's cardholder calls PSCU's call center for some aspect of card service and the PSCU computer, at that point, checks the cardholder's account for whether the cardholder is eligible for a limit increase based on the criteria the credit union has previously set. If the cardholder does qualify, the card center operator tells the cardholder they are eligible and then, if they accept, the limit increase happens immediately. “The cardholder is able to put down the phone or get up from the computer and go use the additional buying power immediately,” Crawford said. Crawford cited the computer option because PSCU has begun to offer a computerized version of the program, where a cardholder who visits their account online can be offered a credit limit increase through a pop-up window on their machine. Crawford said that while just over 21% of credit union cardholders accept the credit limit increase over the phone, more than 70% do so when the offer is made online. Crawford estimated that cardholders on the phone may fear being involved in a long process to get the increase where, on the computer, cardholders may feel more or less assured that the offer was complete. Crawford reported that in the year since it began the program has signed up 31 credit unions and that 21 of those have opted to offer the program online as well. Crawford said PSCU was pleased with the way the program has developed and anticipated that it would draw more credit unions once they understood that the program used their own underwriting criteria and that every $1,000 of credit limit increase translated into a 13% increase in loan balances. The $427 million Fort Bliss FCU, based in El Paso, Texas, has been part of the program since its inception last year and reported being very pleased with it overall. “We have seen our open-to-buy increase across the portfolio by about $1.5 million,” said Julie Tibke, Card Services Supervisor for Fort Bliss. Fort Bliss has about 13,000 credit card holders and offers both Visa and MasterCard products. “Previously our members who wanted to increase their card limits had to apply to do so,” Tibke explained, “they had to seek out a loan officer and fill out a form and go through the credit check. Now they can be offered the increase over the phone,” she added. Roughly a third of Fort Bliss' cardholders who have been offered the increase over the phone have accepted it, Tibke reported, and added that the acceptance has been fairly uniform across the credit union's card products, which surprised the credit union's leadership that had anticipated the program would be more popular among classic cardholders. “We have also been pleased that the increase in the open-to-buy has been consistent over time,” Tibke said. “We initially expected there would be a spike when we put the program into place, and to some extent there was. But the limit increases have continued at the rate of over $100,000 per month over the course of the year,” she added. Fort Bliss had been pleased enough with its participation in the phone program that it plans to sign up for the online program as well, she said. The program is important in the overall credit union card picture, Crawford explained, because it can help credit unions overcome their single biggest hurdle in the search for increased card revenue. “If you look at the Capital Ones and MBNA's,” he said, “their focus is on giving the cardholder the room they need to use their cards to meet their needs. By contrast too many credit unions focus on minimizing their risk from card losses.” Streamlining the process, Crawford said, can help credit unions more effectively manage their card portfolios to greater profit. [email protected]