Providing cardholders with an adequate credit line is crucial because once they approach around 40% of their limit, they tend to resort to using another card for their purchases. This results in them having to make monthly payments and pay finance charges on multiple cards, causing your credit union to lose fees and interchange income. Moreover, they might consider transferring the balance from your credit card to another issuer in order to consolidate their debt. This gradually leads them to view another institution as their primary financial provider. The key takeaway is to regularly evaluate credit limits to offer the right amount of credit. If the limits are too rigid, it hampers your ability to expand your portfolio. This initiative aims to annually increase credit card limits by 20% to 30% of the total portfolio.
Create a plan for portfolio expansion by occasionally or quarterly evaluating credit limits, increasing the amount of consumption available for accounts with solid payment history, and a high level of line of credit usage (40% usage), which favorably affects the growth of billing and transactions.
