The word loan, which was not too long ago a four-letter one among Recession-riddled consumers, carries much less baggage these days. There is an appetite for credit in nearly every corner of the US lending marketplace: Credit card debt is projected to total $900 billion by the end of the year, auto loan balances have reached $1 trillion for the first time ever and mortgage debt is currently sitting at more than $8 trillion.

Whats more, Americans are more creditworthy than they have been for some time. The national average FICO score, now at 695 according to Fair Isaac Corp., is the highest its been for at least 10 years. But ask yourself: What kind of a credit line would that score earn at my credit union?

If youre like many, the answer isnt terribly exciting, particularly when you consider the growing number of non-traditional lenders virtually begging to extend credit to a borrower with that kind of score. The ferocity of that competition is only getting stronger, as online lenders raised a record $542.2 million in equity in the first quarter of this year alone.

Credit unions too often find themselves on the extreme end of conservatism when it comes to extending credit, particularly within the credit card portfolio. This leaves hundreds, potentially thousands, of worthy borrowers off the credit union radar and squarely in the sights of those newcomer fintech lenders. It is estimated almost 800,000 consumers have turned to these start-ups for a loan.

It is becoming increasingly clear that credit unions allowing low-risk tolerance and outdated underwriting models to dampen their lending success may soon find themselves out of the game altogether especially in the credit card space.

Success often comes down to measured aggressiveness. Major banks and startup lenders pursue cardholders with gusto, which naturally makes them feel appreciated. Generally, credit unions arent as aggressive as their competitors. They may offer credit line increases when asked, but there is often no strategy for increasing credit lines in bulk or by member segments. Instead, credit union lenders rely on a dated system of tiers (eg, $6,000 for the best cardholders, $2,000 for the next tier and $500 for students and the credit-stressed).

Following an outdated underwriting model is as good as leaving money on the table. Thats because 70% of a credit card programs revenue is derived from finance charge income. A cardholders balance almost always correlates to his or her credit limit. Conscientious credit users typically will strive to keep their balances below 30% of their overall available credit. If that limit is unnecessarily restricted, it means lower potential revenues for the credit union.

Simply put: Raising limits raises balances, which raises finance income and member engagement.

Higher credit limits can also provide a credit union with a distinct competitive advantage for another reason. Consumers educating themselves on methods for improving their credit scores have become aware that a higher-limit credit card can help (high limit + low balance = better score). Why leave this likely profitable business for the other guy?

Figuring out a responsible way to raise limits, even in a risk-averse environment, doesnt have to be complicated. In fact, it can be done in three simple steps: Identifying the right limits for the right cardholders, eliminating high-risk accounts and checking your plan for compliance with relevant regulations. Following this process can yield total profit increases above 20% in just six months.

As we all know, the world of credit cards is changing and fast. In the digital payments game, every credit card issuer chasing that default card position. Credit unions arent going to get there if members are worried about hitting their limits because of how frequently they use Apple Pay, Android Pay or Samsung Pay.

For credit unions, raising the credit line beats the competition at their own game, demonstrates the credit unions confidence in its members, and ultimately generates the kind of loyalty that keeps that relationship healthy and growing for the long term.

Karan Bhalla is managing director for IQR Consulting. He can be reached at703-473-1574 This email address is being protected from spambots. You need JavaScript enabled to view it..



The USs middle classes are drenched in debt and demand is slowing. So how do banks build profits? By bending the rules.

Two of the top credit-analytics companies are exploring new ways of assessing consumers ability to handle loans, turning away from traditional sources of data such as credit cards and car loans to scour phone and utility bills, change-of-address records, and information drawn from DVD clubs and suppliers of rent-to-own furniture.

The efforts could open up new classes of customer for the big US banks, and come as lenders struggle to generate steady profits in an environment of tightened regulation and ultra-low interest rates. In third-quarter results this week, the USs three biggest banks - Wells Fargo, Bank of America and JPMorgan Chase - have reported year-on-year declines in quarterly revenue.

One of the companies, Fico, has been working on a pilot project with a dozen US credit card companies, and now claims to have developed reliable ways to price loans to millions of people who have historically been off the grid.

Will Lansing, chief executive of the San Jose, California-based company, said Fico was increasingly looking at data on a spectrum: with credit card repayment history at one end - the most reliable guide to creditworthiness - and at the other, information volunteered on social media platforms such as Facebook.

More from FT.com

Top US banks grapple with weak revenue
US banks build defences against downturn
Wells Fargo steadies after rocky start

If you look at how many times a person says wasted in their profile, it has some value in predicting whether theyre going to repay their debt, he said. Its not much, but its more than zero.

Credit cards and car loans are likely to be among the bright spots in the US banks third-quarter figures, with much of the growth driven by segments considered subprime. But mortgages and personal loans should be patchier, suggesting that many consumers across the US have borrowed about as much as they can.



  • Report: Phillys overdraft fees among highest in US

The credit card can be used on any food, beverage and merchandise purchase at Wawa locations, including your favorite Shorti hoagie, but has some added bonuses if you use it to fill up your cars gas tank.

When customers use the credit card to re-fuel at Wawa stores, they will save 5 cents per gallon, up to 100 gallons per month.

The 5 cent-per-gallon savings will be applied as a statement credit at the end of the month to cardholders' statements.

And, through the end of this year, the credit card holders can receive an even bigger discount on Wawa gas purchases. They will be able to save 25 cents per gallon, up to 100 gallons per month.

  • Hiring: Upcoming Main Line Mexican restaurant

Applications for the Wawa credit card are available in all Wawa stores.

Wawa recently opened its Center City flagship location at Broad and Walnut streets, rushing

Kenneth Hilario covers hospitality, restaurants and takes on general assignments and breaking news.


The corporate bond market continued to feel heavy last week as credit spreads leaked wider in the investment-grade market and were crushed in the high-yield market. The new issue market remained nearly nonexistent across both markets. Over the course of the week, the average spread of the Morningstar Corporate Bond Index widened 5 basis points to +184 bps over Treasuries and the Bank of America Merrill Lynch High Yield Master Index widened 68 basis points to end the week at +683.



ZURICH Credit Suisses capital markets advisory unit will help it win business from Asias growing ranks of self-made millionaires, new Chief Executive Tidjane Thiam said in a newspaper interview.

Thiam joined the Swiss bank as CEO in July and signaled a strategy shake-up to focus on private banking and wealth management, particularly in Asia. Credit Suisse is currently the fourth-biggest global player in private banking, according to wealth management consultant Scorpio Partnership.

In an interview published on Monday with The Straits Times in Singapore, the CEO said advising customers on equity and debt market transactions for their businesses also provided an important service for some wealthy clients in Asia.

Banks with a strong equity franchise have a key role to play in helping companies to go to their next stage of development, go public, raise debts to fund development and generate economic growth, Thiam was quoted as saying.

Im quite keen on that part of the business. We can manage the assets and protect and grow the wealth of individuals, but we can also be an entrepreneurs bank and cover their needs.

Growth in Asia Pacific is crucial for Credit Suisse and their rivals. Boston Consulting Group estimates that the region, excluding Japan, will overtake North America in 2016 as the worlds wealthiest.

A Swiss newspaper reported on Sunday that Thiam will announce plans this month to decentralize Credit Suisses global operations in a strategy shift that will boost its presence in Asia and cut jobs in Zurich.

Credit Suisse has said that Thiam will detail his strategy for the Zurich-based bank on Oct. 21.

While talking up the importance of its advisory unit, Thiam again indicated he could shrink Credit Suisses wider investment bank to free up capital.

Ive said that we wanted lower-volatility earnings and less capital-intensive growth and that tells you a lot, he told the newspaper.

(Reporting by Joshua Franklin; Editing by Pravin Char)