In today’s payments landscape, credit card revenue is under increasing pressure. From regulatory scrutiny to intensifying competition and rising operational costs, credit card portfolios are facing headwinds from multiple directions.
Even with growing disruption and an increasing focus on alternative payment methods, credit cards are still a firmly embedded cornerstone in the U.S. payments ecosystem. Credit card portfolios remain one of the most powerful drivers of profitability and member engagement. In order to protect—and grow—their credit card revenue, credit unions must evolve their growth strategies to keep up with the rapidly changing payments environment.
Why credit cards still matter
Credit cards deliver some of the strongest returns across the product portfolio, with high return on assets (ROA) and large contributions to non-interest income through interchange and fees. Credit cards often generate significantly higher returns on equity—making them a critical engine for profitability.
Credit cards are also one of the most powerful tools for member engagement. As reported in Velera’s annual Eye on Payments study, consumers prefer to use credit for a variety of daily financial activity, including full-service dining, big-box retailers, fuel purchases, major goods and transactions ranging from $30-200. This level of regular usage provides credit unions with frequent touchpoints, rich behavioral insights and many opportunities to deepen member relationships. Highly engaged cardholders are more likely to hold additional products, maintain higher balances and remain loyal to their credit union over time.
The forces driving revenue compression
While the value of credit cards remains strong, the economics surrounding them are shifting.
- Regulatory and legislative pressure: Interchange fees, a major source of card revenue, are facing scrutiny at both federal and state levels. Proposals to reduce interchange rates, increase routing competition or limit what transactions qualify for fees all introduce uncertainty and potential downside risk. Other ideas—such as interest rate caps or changes to long-standing credit card regulations—continue to surface. While not all of these proposals will materialize, credit unions need to prepare for multiple possible outcomes.
- Intensifying competition: The competitive landscape is evolving rapidly. Traditional competitors like large national banks continue to invest heavily in rewards, digital experiences and marketing. At the same time, fintechs, neobanks and non-traditional players are expanding aggressively into credit. Buy Now, Pay Later (BNPL) providers and even brands like airlines and retailers are capturing share by embedding financial products directly into their customer experiences. Many of these players are now extending into credit card offerings, further crowding the space. Credit card revenue is no longer the domain of traditional issuers alone.
- Technology and structural disruption: Emerging payment models are also reshaping the landscape. Alternatives like BNPL and pay-by-bank are beginning to chip away at traditional card volume. Looking ahead, open banking introduces new dynamics around data ownership and portability, potentially enabling competitors to target cardholders more effectively. While some of these innovations are still evolving, their long-term impact could fundamentally alter how transactions—and the value tied to them—are distributed.
- Rising costs: At the same time revenue is under pressure, costs are rising. Financial institutions are investing heavily in areas like fraud prevention, cybersecurity, compliance, and digital innovation—all necessary to remain competitive and secure. These investments, combined with slower growth in some segments, are putting strain on efficiency ratios.
Strategies for protecting and growing revenue
Credit card portfolios can no longer rely on momentum alone—they must be actively managed and optimized. The good news is that institutions have meaningful options. The most successful strategies combine data-driven decision-making with targeted optimization and thoughtful innovation.
1. Start with data—understand and model performance
The foundation of any strategy is a clear understanding of current performance and future scenarios. Credit unions should:
- Establish baseline projections for portfolio growth and revenue.
- Perform monthly variance analysis and re-forecasts of main revenue, expense and volume line items.
- Model potential impacts from regulatory changes or pricing adjustments.
- Simulate outcomes from marketing campaigns or product changes.
This approach enables your credit union to move from speculation to informed decision-making—and to act proactively rather than reactively.
2. Optimize the core product
Before launching new initiatives, it’s critical to maximize what already exists. That starts with benchmarking performance against peers and identifying gaps. From there, credit unions can:
- Improve onboarding to drive early card activation and usage.
- Reduce friction in the application and approval process.
- Identify and address revenue leakage (such as uncollected or outdated fees).
- Invest in efforts to identify prospects for new or additional cards via cross-sell activity, such as:
- New member onboarding process—identify qualified members and present pre-approved offers.
- Mine bill and ACH files for card users at other financial institutions and make exceptional account opening offers.
- Adding joint or authorized users—Apple Card permits up to six users per account.
- Permitting multiple accounts to qualified individuals – for example, allowing the same person to have a low rate card and a travel reward card provides maximal utility, allowing more spend capture.
- Develop cross-sell offers to depositers and borrowers where additional benefits come with opening and using a credit card.
Often, the greatest opportunity lies not in reinventing the product, but in executing it more effectively.
3. Expand revenue through product innovation
As new payment models emerge, they also create new revenue opportunities. For example:
- Installment payment options can replicate BNPL functionality within existing card programs.
- Relationship-based rewards can incentivize deeper engagement across products.
- Embedded finance partnerships can extend credit offerings into new channels.
These innovations allow credit unions to meet evolving member expectations while unlocking incremental revenue streams.
4. Reevaluate pricing strategy—carefully
Pricing remains one of the most powerful, yet sensitive, levers. Credit unions may consider:
- Adjusting APRs or refining risk-based pricing
- Introducing or increasing fees for specific transactions, such as cash advances
- Reexamining the role of annual fees in certain segments
However, these changes must be approached cautiously. In a highly competitive market, pricing decisions can quickly impact member acquisition and retention.
5. Re-engineer rewards programs
Rewards programs are often one of the largest variable costs in a credit card portfolio—and a key area for improvement. Opportunities include:
- Excluding low-margin or high-risk transactions (e.g., certain cash equivalents) from earning rewards
- Introducing clearer rules to prevent misuse
- Evaluating expiration policies or program structures
Even small adjustments can have a meaningful impact on overall profitability without diminishing perceived value.
6. Reduce costs without sacrificing experience
Operational efficiency is essential in a lower-margin environment. Key actions to take include:
- Increasing adoption of digital statements and communications
- Expanding self-service capabilities for cardholders
- Cleaning up inactive or dormant accounts
These efforts can reduce cost per account while maintaining—or even improving—the cardholder experience.
7. Explore strategic alternatives
For some credit unions, structural changes may offer the greatest benefit. Options can include:
- Partnering with or outsourcing to specialized providers
- Selling underperforming portfolios
- Exploring mergers or geographic expansion
- Collaborating with fintechs to enhance capabilities
Not every credit union needs to build and manage every component in-house.
Keeping the member at the center
Amid all these strategies, one principle remains constant: the member must come first. Short-term revenue gains that erode trust or diminish experience can lead to long-term losses through member attrition and disengagement. Credit unions must strike a careful balance—aligning a clear, compelling value for their members along with profitability.
Turning pressure into opportunity
Credit card revenue compression is real and it’s unlikely to ease in the near term. But it also presents an opportunity. Credit unions that take a proactive approach—grounded in data, focused on optimization and open to innovation—can not only withstand these pressures, but emerge stronger.
The path forward isn’t about any single strategy. It’s about combining the right strategies to build a more resilient, adaptable and cardholder-focused credit card business.
