Pockets of opportunity exist within nearly every credit union’s credit card portfolio. To find them, cards teams must turn over even the most lackluster of stones. In credit card terrain, these stones are those accounts still open but rarely, if ever, used.
The key to success is identifying which of a portfolio’s dormant accounts offers the greatest potential for reactivation. Like every segment within a credit card portfolio, the dormant segment is composed of a variety of subsegments. The subsegment with the most potential is the one composed of inactive cardholders who are still actively engaged in other areas of the credit union.
First, identify those cardholders who are currently taking advantage of other credit union products, such as mortgage or auto loans, perhaps even business accounts. With the right offer, these individuals are much more likely to reengage with the credit card product than their less active counterparts.
Next, filter out accounts with the least revenue potential. A good place to start is by excluding cardholders who only take advantage of promotional periods, such as free interest for 12 months.
After you have established this core group of dormant accounts, analyze as much internal and external data as you can. Your objective now is to gain an understanding of how these members stand to benefit from reactivation of their credit cards. Are they actively using other credit cards? What has happened to their FICO scores in recent months? Where are they on the member or life-stage journey?
The answers to these questions help segment the cardholders into groups that can be targeted with specific offers. Our analysts find dormant credit card account owners generally fall into one of four basic categories:
They need a different product: Members may be using a variety of credit union products to meet their financial needs, even though a credit card may be more sensible when coupled with a competitive, even below-market, APR.
They need a higher credit line: Cardholders may be inactive simply because their credit union hasn’t extended as much credit as has another issuer.
They need a different APR: If the APR is too high to be competitive, members will naturally turn to other issuers for a better option.
They have multiple needs: A combination of the above keeps members from using their cards.
With a clearer picture of your cardholders’ needs, you can more effectively mine the gold that could be hiding within your dormant account segment. A few ideas:
Execute an upgrade campaign – Offering basic card account holders an opportunity to own a rewards card, for instance, can breathe new life into a portfolio (not to mention, member relationships).
Provide credit line increases – Cardholders rarely consider asking their issuers to change what many of them perceive to be set-in-stone limits. Instead of charging up four different cards with small balances, cardholders may prefer to use a single card with a higher limit. Be that card!
Set a down pricing strategy – With the right data and a good analytics partner with knowledge of the current competitive landscape, your pricing can better align with more of your members’ expectations.
Give them cash back – The primary reason credit card accounts go dormant is their owners lack truly valuable incentives to use their cards. This is especially true among high-income cardholders. Cash back rewards are one of the best ways to incentivize these cardholders.
Beyond optimizing the credit card portfolio, the exercise above will provide countless insights into the habits, behaviors and preferences of the consumers who have already chosen to align with your credit union in some way or another. Talk about a high-target audience. The member intelligence gathered by the cards team can be helpful to any number of leaders within the cooperative, each working to know more about the consumers they serve.