How can members use credit cards as a tool for financial wellness?

While credit cards are not often associated with financial wellbeing, their many benefits can help members reach important financial goals. Credit unions, with their characteristically low interest rates and fees, are already in a strong position to help members utilize the benefits of credit cards to support their financial well-being. Below are some steps to take to help your members make the most of their credit union-issued credit card.

Let’s start with a quick overview of the benefits credit cards offer that you can highlight to members. These include:

• Developing a positive credit history
• Rewards
• Convenient shopping online and in-person
• Ability to track purchases for easier budgeting
• Fraud protection

Steps for promoting financial wellness

According to Melanie Murphy, Executive Director of the Illinois Credit Union Foundation, “Consumers today are increasingly aware of the importance of financial health which gives credit unions an opportunity to provide helpful guidance including how credit cards can be used to build credit scores and by promoting positive financial behaviors such as paying off balances.”

Responsible card use is critical for harnessing the benefits of credit cards while avoiding the pitfalls. Credit unions can help support their members in this goal through both education and technology.

Education

Knowledge is power. Unfortunately, many cardholders do not have a full knowledge of the features and costs of their credit card. More than 40% of cardholders are not aware of what the interest rate is on their credit cards as well as many other factors that can have an impact on their financial situation (NerdWallet).

Credit unions can help fill the gap with financial education and counseling programs. Some tips for educating members include:

• Clear communication: Communicate regularly with your cardholders so they know what to expect from your card program to better plan their budgets. Make this information available several places, including your website and any app you offer.
• Fee and rate education: Knowing the costs of using their cards, as well as what can be done to address them, empowers members to budget more effectively. Members gain a better idea of what they can spend without going over their means.
• Motivate good habits: Send members tips and reminders about best practices for using their cards and motivate them to pay off balances monthly by offering additional rewards like reduced interest rates, additional reward points, or local discounts when they achieve this goal.
• Early education: Educate members about rates, rewards, fee, etc. when they first sign up for their cards so they’re equipped right from the start. Go a step further and offer financial education and training for teens and pre-teens in your community so they have a head start on how to use credit cards as a positive tool in their financial development.

Technology

Digital tools and services can help you better support members in responsible card use.

• Apps and online card management: The ability to manage cards and track purchases online can help cardholders stay on top of their debt. Apps can also help them protect themselves against fraudulent activities through real-time alerts. Financial learning apps can help with early education, teaching children healthy financial habits that will serve them well in adulthood.
• Artificial intelligence: AI tools can help keep members updated with information and tips for responsible card use without taking more time away from your busy staff.
• APIs: This technology can help members track all their credit card debt in one place as well as give credit unions insights into who might benefit the most from debt management services.

From developing a positive credit history to rewards, credit cards offer many benefits that can boost cardholders’ financial wellness. By taking proactive steps, your credit union can help members spend strategically, making the most of cards with the best interest rates and rewards.

Envisant is here to help you and your members make the most of a credit card program. To learn more about how our team of experts can help you, visit our website at www.envisant.com.