Credit Card Database Management: Garbage In, Garbage Out
By Sarah Snell Cooke, Principal, Cooke Consulting Solutions
The foundation for an accurate portfolio analysis is active database management. Like a house, if the foundation is no good, the house won’t be either.
Database management starts at the credit union. All departments – and particularly collections – must agree on the codes used when blocking, closing or changing an account status for any reason. GoCUCards Founder Ondine Irving explained, “Processor perform monthly and quarterly purges, but more often than not the credit union can purge ‘statused’ accounts long before the criteria are met by the processor’s automated, scheduled purge.” Two key criteria for automated system purges are a passed expiration date and no cardholder activity on the account for 12 months.
Here are seven types of accounts that your credit union is paying for and can remove from the system:
- Closed accounts
- Lost accounts
- Stolen accounts
- Upgraded accounts
- Replacement accounts
- Charge-off accounts
- Other miscellaneous accounts
This also applies at mass reissues, such as following a data breach that affects the credit union.
Looking for more information on this topic? Check out Ondine’s Schools of Credit Card Management coming up in November in NOLA!
About 65% of accounts generating transactions in a particular month is a strong active rate. Of course, you want to keep those accounts generating finance charge income as well, but that’s a different type of active account. Note, however, that processor definitions of active accounts vary, from accounts with a balance to accounts with payments posting only to accounts that have any type of transaction posting, including reversals and credits.
Inactive accounts include ‘statused’ accounts, accounts not activated, accounts with a zero balance, accounts with no activity in that specific month and accounts dormant. After eliminating these accounts, you can know your true inactive rate. Many credit unions specifically neglect the accounts-not-activated report, but it must be reviewed on a regular basis to minimize fraud, database expense and unnecessary future reissues. “I’ve worked with some credit unions that have hundreds, if not thousands, of accounts on this report for as long as two years!” Ondine said, and that’s a big no-no.
TIP: Be sure to ZERO OUT any credit lines account in a permanent blocked status to reduce the outstanding credit line liability of the credit union. This will allow more accurate reporting of credit union use ratios and average credit lines.
When eliminating these accounts and credit lines, you should notify the cardholder because it can affect their credit score on inactive, closed or card not activated accounts. If it’s a reissue for a lost card or account upgrade, there’s no need to contact the member because you’re just removing the old account.