Why compete with big reward cards for a share of the wallet?
Deepen member relationships with money-saving balance transfer offers instead.
For too many years, small to medium and even large financial institutions have competed for a share of the credit card market. But it’s time to stop competing and take a totally different approach, one that allows your members to reap their rewards without paying higher interest rates.
Americans are willing to pay more for their rewards.
People love their rewards and will pay the entire balance monthly or take a hit on the interest rate in exchange for discounts on travel, accommodations and merchandise. In fact, according to a 2021 Bankrate survey,1 59% of U.S. adults carry at least one reward card in their wallet. But we all know, many community credit unions simply do not have the means to go head-to-head with big credit card reward programs offered by airlines, hotels, department stores and larger financial institutions. So how do you compete? You don’t. And that can be your key to success.
Balance transfers will help members pay less.
Credit unions operate to promote the well-being of their members. Profits made by credit unions are returned to members in the form of reduced fees, higher savings rates and lower loan rates. They’re also very proud of their “people helping people” philosophy. And this is how credit unions can separate from the herd with one very simple change of focus. Encourage your members to stay with their current reward credit card programs. At the same time, offer them a money-saving solution:
“Transfer your high-interest card balances to our low-interest card—with a $0 balance transfer fee.”
The national reward card interest rate for banks is over 20%,2 and reward card users are willing to pay it. Now, tell your members NOT to give up on their reward cards. Go on. Keep enjoying the airline, hotel, merchandise or cashback rewards. But why pay such a high rate? Let them know they can save money by transferring their balances for a $0 transfer fee and LOWER the interest rate to just a fraction of what they pay now, often as low as 7% – 9%. With this unique strategy, your credit union has offered a proactive solution that enables members to enjoy their rewards and save money.
Change the conversation. Deepen member relationships.
Why encourage members to spend money with your competitors? That’s money going to another financial institution, not yours! But let’s be honest with each other. With almost 70% of reward card holders cashing in on their rewards,1 your members probably won’t cut up their cards and leave their precious rewards on the table. By encouraging them to stay with their reward card, you have their attention. Who would have ever thought their credit union would promote such a strange campaign, advising them to stay with their card from another institution? I’m here to tell you this is a strategic, bold and, most of all, successful marketing campaign strategy. NOW I have your attention, don’t I? And, even more importantly, you have the attention of your members.
Stronger relationships lead to more profitability.
Credit unions own the market share for better rates and little to no fees. Large credit card reward programs cannot compete with this, not when their “as low as” rate typically starts much higher than your “as low as” rate. By focusing your strategy on NO FEE transfer balances and a lower interest rate, you’ve become a trusted advisor, working in the member’s best interest. You’re all about the member, not just making money for your credit union. You’ve created an opportunity to give back to your members and educate them on how to be fiscally responsible.
I know. Credit cards bring in big dollars. I don’t want you to lose out on that. But by making room in the sandbox for everybody, you’ve created even greater opportunity for your credit union. You continue to make money off your standard rates while educating and supporting your members with money-saving advice. By offering a solution that allows them to save money on interest and reap the benefits of their rewards cards, they now know you’re more than a place to stash cash, you’re their financial advocate. You’ve offered a solid solution that enables them to save more, and they are now more apt to turn to you first for their financial needs.
Take your share of the wallet with an innovative approach.
In today’s economic environment, many Americans struggle to make ends meet each month. By letting them know they can save a bundle on interest payments over time with a simple no-fee balance transfer to a low-rate card, they get the best of both worlds—rewards and a low rate!
When you put your members first by playing nicely with competitors, you’ve created a surprising, new dynamic. The big reward credit cards continue to own their piece of the wallet—and you get your own piece while creating deeper relationships. Everyone will be a winner, especially the member.
1 Johnson, A. (2021, April 15) Survey: Most Americans losing out on easy money during coronavirus pandemic. Bankrate https://www.bankrate.com/finance/credit-cards/preferred-payments-survey/
2 Wren, S. & Peterson, L. (2022, August 4) Average Credit Card Interest Rate Is 21.33% The Balance https://www.thebalance.com/average-credit-card-interest-rate-4772408