Will Credit Unions "Scrooge" or "No Scrooge" this Holiday Season?"

by Ron Daly

 

Black Friday and Cyber Monday have come and gone. It appears that the initial reports of consumer holiday spending were better that expected in this MSNBC story "Shoppers turn out, but hold on to their wallets" (click here to read). Seems the average amount spent over the Black Friday weekend - $372. My family escaped for a few hours of shopping on Friday so I'm not exactly sure where I fall in the statistics.

 

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This article from CNN (click here) reports that consumer spending is expected to decline sharply during the 2008 holidays due to constrained budgets and financial anxiety about the future, according to the survey released Monday. Goes on to say that constrained budgets and financial anxiety mean 55% of consumers are planning to cut back. In the same story CUNA's Chief Economist Bill Hampel says "This year, I'd guess spending could be 2% to 5% less than last year."

Cyber Monday, the e-commerce equivalent to retail's Black Friday, is seeing more modest gains (says the Wall Street Journal).  But some online retailers said consumers were buying less expensive gifts on Monday than in previous years, potentially biting into profit margins. And many said they expect sales gains for the holiday season to be less robust overall than in previous years.

 Don't "Scrooge" your members 

So where am I going with this? For years members have used credit cards to fund their holiday "joy" and the industry took advantage of it. With banks jacking rates and cutting credit card limits (see this blog article) there's no room to shop! Now for every year as far back as I can remember someone in the credit union industry did all or some of the following to boost their credit card balances: 

1) Automatic credit limit increase in November or December, 

2) Skip-a-pay in December or January, and 

3) Balance transfer programs in January or February 

Are these still great ways to increase credit card balances? Let's do the ROI math for $1 Billion plus credit union (data from Callahan and Associates) – Average credit card rate is 10.17% less cost of funds of 3.11% and net charge-offs of .78% leaves you 6.28% margin. Even if you subtract average operating expenses of 2.94%, you've still got 3.34% in your pocket. 

Haven't heard much about these this year and wondering if credit unions are missing a "no scrooge" opportunity? 

Don't get "Scrooged" by your members.

Of course there is an opposite side to every coin. Granted, it's the most wonderful time of the year, but credit card usage is expected to be somewhat less "wonderful" than usual. The CU Journal (click here) asked cards experts what credit unions can expect this holiday season- and what they can do about it in an article "What To Do When Card Volume Isn't As 'Joyful' As Usual" (click here to read). There are some good tips in the advice so your members don't "scrooge" you. 

I would like to hear your thoughts. Should credit unions be "Scrooge" (i.e. offer less in terms of credit lines and balance transfers)? Or "No Scrooge" (offer more relief for members by increasing credit lines and offering balance transfers)? Or share what your credit union is doing this holiday season for its members.