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White paper discusses card portfolio potential

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DES MOINES, Iowa (3/13/12)--A new white paper from TMG Financial Services underscores the importance of how credit unions should evaluate their credit card portfolios--even if they are not considering selling them.

"There is tremendous merit in taking a step back and evaluating your portfolio as if you were preparing to sell it," said Jeff Russell, author of the white paper, "Sale or no Sale: Maximizing the Value of Your Credit Card Portfolio," and president/CEO of TMG Financial Services (TMGFS). "This gives you a chance to look at the overall performance objectively, something you may not be doing on a regular basis."

Russell discusses how his company, a third-party agent issuer, takes a broad look at how pricing, risk management and marketing strategies can help--or hurt--a credit card portfolio.

"We have certain metrics that we look at when we evaluate a credit card portfolio for purchase," Russell said. "Those metrics are aligned with measuring how well your portfolio is performing, so even if credit unions aren't preparing to sell their portfolio most want to ensure they are maximizing the potential of the portfolio. Often times, there are just simple adjustments that can mean the world of difference, but the credit union hasn't had the time or resources to devote to periodic review."

Credit unions should address three areas: pricing, risk management and marketing, Russell said.

Competitively pricing credit cards is more than simply offering the lowest interest rate. The new reality dictates that credit unions must make continual adjustments to their pricing so they are ready when rates begin creeping up, the cost of funds increases or the cost of administering cards rises.

When credit unions take a proactive approach to risk management they not only make their credit card programs more profitable, they increase the number of accounts because they offer different rates to members with different credit scores, the company said.

One characteristic all successful portfolios share is strong marketing support. Credit unions should make an investment to ensure members not only know they offer a credit card, but why it is better than other offers arriving daily in their mailboxes. Just as credit unions have made savings and checking accounts a priority, credit card marketing should not just be lumped into the loan category, TMGFS said.