While they may not put the major credit card issuers out of
business anytime soon, credit unions are convincing more of their
members to carry union-issued plastic.
Callahan & Associates, a financial consulting firm, released
a report last month that found that credit card penetration rates
at credit unions reached 15.3 percent in 2013. That number is 55
basis points greater than 2012 levels and 95 basis points more than
five years ago.
But while the overall gains are modest, the report notes that
some individual credit unions claim credit card penetration rates
of up to 65 percent, suggesting that unions that emphasize credit
cards could make major gains in the future. Still, some industry
analysts question whether credit unions are willing to offer cards
that truly rival those offered by major banks.
Credit unions that have succeeded with credit cards
For credit unions, credit card market penetration refers to the
number of members who have a credit union-issued card. For example,
the industry average of 15 percent means that 15 of every 100
credit union members have a credit card affiliated with their
According to Callahan & Associates, the credit union with
the best market penetration can't be found on the list of the
nation's 50 largest credit unions. Instead, it is Taupa Lithuanian
Federal Credit Union in South Boston, Massachusetts. The
33-year-old institution only has 1,200 members, but more than 65
percent of them carry a Taupa Lithuanian credit card.
Nationwide, the analysis found that at least of half the members
at the following credit unions had a credit card opened through
- Taupa Lithuanian in Massachusetts: 65.66 percent
- Valley One Community in Ohio: 60 percent
- O.A.S. Staff in the District of Columbia: 58.18 percent
- Napus in Virginia: 53.6 percent
- Entrust in Virginia: 51.83 percent
- KUE in Kentucky: 51.31 percent
- Houston Police in Texas: 51.25 percent
- School Employees Lorain County in Ohio: 50.66 percent
The need for more competitive terms
While credit unions have made some progress with their credit
cards, their terms may still not be attractive enough to lure
customers from their big-brand cards. That's according to a report
from card-processing organization Card Services for Credit Unions,
which notes that institutions may have to offer more if they want
to compete with cards offered by major banks.
Among the strategies suggested in the report is the adoption of
zero-interest teaser rates
and the development of
rewards credit card
programs that are on par or better than those offered by banks.
However, the rewards might not have to be anything extravagant. At
Taupa Lithuanian, the incentive they use to convince members to
open an account is a $10 coupon to the SBLCA Lithuanian
The first step, however, may simply be to get credit unions to
offer credit cards. Callahan & Associates says that during the
first quarter of 2013, only 54 percent of credit unions offered
credit cards to their members.
While credit unions may incur some expense in setting up a
credit card program, Card Services for Credit Unions argues it
could be even more costly for institutions to ignore customer
demand for credit cards. With banks offering attractive deals for
customers who open both credit card and deposit accounts, credit
unions may lose members who decide to consolidate their business
But if the numbers from Callahan & Associates signify a
trend, credit unions who take the plunge may be able to count on
more customers at least considering their credit card.