Revolving balances, not spending, drive most credit-card profitability. For community banks, metrics like net interest margin, charge-offs, customer churn, and the cost structure of rewards and fraud matter far more than swipe volume. Technology, compliance, and operations costs can also erode returns. Smaller banks that treat cards like a volume business instead of a credit-asset business can overstate rewards and understate risks; instead of competing on rewards, they should leverage partnerships and cultivate strong customer relationships with “revolvers,” this article says.
Which performance metrics have you prioritized in your card program? Are they aligned with what drives profitability for similarly sized institutions? Have you fully mapped the true costs of running your card program, including rewards liability, compliance, fraud, and operations?