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3 Top Expenses in Your Credit Card Program

By Sarah Snell Cooke, Principal, Cooke Consulting Solutions

Credit cards are a lucrative line of business for credit unions. Is your credit union really getting its money’s worth out of the program? Make sure your credit union is calculating every last expense when determining credit card program profitability.

“When you receive a portfolio analysis from your processor, be sure to audit each expense item. I have seen some that greatly underestimate processing expense,” 30-year credit card program veteran Ondine Irving, founder of GoCUCards, explained.

GoCUCards hosted a special 2-hour webcast, July 26, to educate credit union credit card professionals manage card program income and expenses. Members can view the archived recording with credit card portfolio expert, Ondine Irving, here.

Charge-offs are going to be your credit card program’s top expense, but it’s important to keep it in context. Worry less about the dollar amount and more about the ratio, Ondine advised. Between 1% and 2% is a good gauge. Less than 1% means you might not be taking enough risk to optimize profitability, but more means the program might be a little too high risk.

Processing comes next in the order of expenses. “What I’ve learned from my years in the credit card business is to calculate expenses based on processing expenses per account on file per year,” Ondine said. “I originated the formula to take out the inconsistencies between different processors’ invoicing methods to create a truly apples-to-apples comparison.” She added
that the cost of full-service processing should fall around $30-$35 per account per year; this is up from previous years because of EMV-related expenses. Pass-through processing should be $20-$30 per account per year.

Similar to charge-offs, rewards-related expenses should be considered as a ratio. Don’t overreact to the dollar amount, Ondine said. Rewards programs, GoCUCard’s blog topic in two weeks, only represent about 10% of your total credit card program expenses.

Attend one of GoCUCard’s Schools of Credit Card Program Management, and review your processor invoice on the spot with Ondine. The next School is coming up Aug. 7-9, in Chicago. Learn more about the Schools today!

Other expenses:

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