TNB Overhauls Freedom First FCU Credit Card Program

Disappointed in the stagnant growth and marginal revenue of its credit card program, Freedom First Federal Credit Union decided to give the program one more chance. It changed processors, to TNB Card Services, and launched an aggressive overhaul of the card program that has paid off in 9.5% growth in outstanding balances.

TNB and Freedom First FCU jointly announced today the successful revamping of the credit union’s Visa credit card program. Freedom First’s card portfolio was thoroughly analyzed and assessed through TNB’s portfolio consulting group. The portfolio was rated on risk, credit line management, and portfolio segmentation. Portfolio consultants then reviewed the data and developed a comprehensive and strategic plan to grow the portfolio.

Freedom First, 50 years old, was originally known as Roanoke General Electric Federal Credit Union. Now community chartered, it serves the southwestern Virginia counties of Roanoke, Botetourt, and Montgomery. With some 36,000 members, Freedom First FCU has more than $190 million in assets.

Paul Phillips, CEO of Freedom First FCU, said the credit union and TNB applied credit scoring to the entire portfolio as part of the conversion. That enabled Freedom First FCU to extend Platinum cards and higher credit limits to two-thirds of the more than 9,000 converted accounts.

“Typically, a converted portfolio declines at first because of the higher APRs that higher-risk cardholders receive when the portfolio is analyzed,” explained Dusty Bowers, senior vice president and national sales manager of TNB Card Services. “But because so many cardholders in the Freedom First FCU program received a lower rate, it reversed that trend.”

Phillips agreed, explaining, “In most cases, members’ interest rates went down and their limits went up. We also eliminated the annual fee and they now get cash back rewards. The effective net yield of the portfolio increased because of the new risk-based pricing strategy and lower service cost.

“Late fees were also modified along with over-limit and cash advance fees. The new fee structure more than made up for the revenue we lost when we eliminated annual fees and for the increased cost of adding cash-back rewards. Because the end result was a better card program, members not only kept the card, but actually started using it more.”

Phillips noted how TNB’s portfolio consultants identified where Freedom First was leaving money on the table and what the credit union needed to do to grow the portfolio. TNB offered capabilities, such as variable rates for different card products, that Freedom First’s former processor couldn’t do.

Freedom First now offers its members a high-value card that competes with what the national issuers offer. Increased utilization is powering the portfolio balance, and the pricing strategy, with its revamped APRs and fees, is generating much greater revenue. Increasing the credit lines also worked well, with the average credit line now at nearly $3,500, a 15 percent increase over the pre-conversion portfolio average.

“We felt the credit card was a key component of our product offering, and if the program was redesigned and priced correctly, it could be a winner,” Phillips said. “I am more than pleased with the results and am confident the portfolio will continue to grow.”

Freedom First FCU chose to convert its card program to TNB after reviewing a number of processors. It chose TNB based on the price of its program, flexibility in marketing and account management, TNB’s experience as a processor and card portfolio owner, and its portfolio consulting service, which proved to be a major benefit. In addition to processing, Freedom First FCU also uses TNB for its card activation program, card reissuing, and other administrative functions.