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November 19, 2009
Topics Today
Goals
Credit Card Consolidation Loans
First Credit Cards
Transaction Accounts
Credit Card Consolidation Loans
Card-carrying students
Seniors Freshman
91% have a credit card 42% have a credit card
56% carry 4+ credit cards 15% carry 4+ credit cards
$2,864 average balance $1,585 average balance
Credit Card Consolidation Loans
• Lower monthly payments.• Ability to pay off debt faster.• Eliminating confusion.• Paying only one bill instead of many.• Lower interest rates.
Credit Card Consolidation Loans
Credit Card Consolidation Loans
Young Adult Transaction Accounts
Transaction Accounts Targets
• 76% of 25-34 year olds used a debit card in prior month (Sept. ‘08) vs. 63% using credit card.
• 71% of 18-24 year olds used a debit card in prior month (Sept. ‘08) vs. 51% using credit card.
Source: Javelin, "Credit Card Spending Declines,” March 2009
Financial Transactions Trends
Young Adult Transaction Accounts
Most popular features:•Online banking (95%)•Online bill pay (84%)•E-statements (84%)•Online tutorials (63%)•Affiliated credit card (53%)•Online account opening (47%)
Young Adult Transaction Accounts
Differentiating features:• High rates • Reward points• Special debit card
design• Mobile banking
Transaction Accounts Best Practices
• Avoid “teen” or “Gen Y” in title• Make it free• Debit, debit, debit• Bundling: Credit card, overdraft
LOC, etc.• Mixed results from education
sessions
Transaction Accounts Best Practices
Offer tangible rewards
Young Adult Transaction Accounts
Americans’ Reward Card Preferences
• 56% prefer cash-back rewards• 23% prefer air miles• 12% prefer points• 9% prefer automatic discounts or rebates
Transaction AccountsBest Practices
Emphasize (and personalize) debit
Rewards that RewardWSJ • Sept. 22, 2008Meyer-Waarden&Benavent
Economic rewards
“save money”
Hedonistic rewards
“feel pleasure”
Social-relational rewards
You’re invited
“valuable relationships”
Informational rewards
“make better decisions”
Functional rewards
“save time/effort”
First Credit Cards
• 1 in 3 high school seniors carries a credit card
• 56% of college freshmen report getting their first credit card at age 18
• 2 out of 3 college students have a credit card
• The first credit card relationship lasts on average 15 years
Credit Card Charge Volume v. Outstanding Revolving Debt, 1990-2009
Note: 2009 Data point for Outstanding Revolving Debt is from May 2009. Source: Card Industry Directory (Editions 1-20) Faulkner & Gray.Federal Reserve Table G.19 Consumer Credit, available at http://federalreserve.gov/releases/g19/current/g19.htm
YearNumber of Cards (U.S. in millions)
US Charge Volume (in billions)
U.S. Year End Receivables (in billions)
1990 272.0 $348.5 $172.61991 282.8 $371.1 $188.61992 299.7 $400.8 $201.71993 331.4 $474.9 $241.21994 383.0 $581.5 $287.91995 424.5 $700.9 $357.91996 451.3 $798.1 $409.51997 493.3 $887.0 $439.01998 519.9 $974.0 $451.81999 626.0 $1,095.7 $491.62000 675.3 $1,250.4 $553.62001 743.0 $1,369.3 $605.02002 606.9 $1,426.4 $633.32003 616.1 $1,321.4 $667.82004 662.4 $1,451.8 $691.22005 671.7 $1,618.8 $713.52006 667.0 $1,783.3 $736.42007 694.4 $1,904.6 $838.1
Credit Card Data, 1990-2007
Source: Card Industry Directory, Faulkner & Gray: Editions 1-20
Year Outstanding Revolving Debt (in billions)
Charge Volume(in billions)
1990 238.6 348.51991 263.8 371.11992 278.4 400.81993 309.9 474.91994 365.6 581.51995 443.5 700.91996 499.6 798.11997 536.7 8871998 578.0 9741999 606.8 1095.72000 678.5 1250.42001 716.6 1369.32002 736.4 1426.42003 758.3 1321.42004 793.5 1451.82005 805.0 1618.82006 875.4 1783.32007 941.8 1904.62008 976.1 1932.32009 928.0
In Favor of First Credit Cards
• 1 in 3 high school seniors carries a credit card
• 56% of college freshmen report getting their first credit card at age 18
• 2 out of 3 college students have a credit card
• The first credit card relationship lasts on average 15 years
CARD Act = CU Standard Practice• Requires issuers extending credit to young consumers under the age of 21 to obtain an application that contains: the signature of a parent, guardian, or other individual 21 years or older who will take responsibility for the debt; or proof that the applicant has an independent means of repaying any credit extended;• Limits prescreened offers of credit to young consumers;• Prohibits increases in the credit limit on accounts where a parent, legal guardian, spouse or other individual is jointly liable unless the individual who is jointly liable approves the increase;• Increases protections for students against aggressive credit card marketing, and increases transparency of affinity arrangements between credit card companies and universities.
Source: blogs.findlaw.com
First Credit Card Best Practices
• Responsible Late Fees – Average fee of $34 (2005) • Responsible APR – Student oriented cards carry an average 15% APR• Savings Component – Offer “overpay” option or cashback to savings automatically• Slow-Rising Intro Rate• Share credit scores with members regularly• Forgive a handful of late or over-payment fees annually
Parent Connection
• Trust already in place with existing members• Students cite parents as second most important input for deciding on credit card (after direct mail!)
• Combined offer to young adult AND parent differentiates you
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