The Build vs. Buy Decision Every Card Portfolio Faces in 2026
By Liz Froment, Contributor at The Financial Brand
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Card programs are still growing at credit unions, with balances at federally insured credit unions rising 3.1% in 2025 to $87.8 billion, underscoring their continued strategic importance.
But the revenue and costs of a card program don’t scale the same way. What used to be just a product line now requires managing unsecured lending and underwriting, fraud prevention, digital servicing, rewards, disputes, and compliance while keeping up with constantly evolving technology.
Need to Know:
- The processor bill is only part of the cost. Servicing, fraud, credit losses, rewards, technology, compliance, disputes, collections, and portfolio management all factor in.
- Scale can change the economics. Fixed and semi-fixed costs are harder to spread across smaller portfolios, making it more difficult to run an in-house program.
- Fraud and technology require ongoing investment. Fraudsters adapt quickly, requiring banks to continuously invest in monitoring, customer outreach, employee training, and other quality controls.
- Profitability isn’t the only measure. Banks and credit unions also need to consider control, value, capacity, and opportunity cost.
Key insight: “Card programs are no longer just a payment product,” Nicole Dilts, vice president of commercial solutions at MSU Federal Credit Union, told The Financial Brand. “They are a critical part of the overall member relationship, digital experience, revenue strategy, fraud prevention framework, and product development roadmap.”
For many community banks and credit unions, the question is whether they have the scale and resources to keep running card programs on their own.
The Cost Behind the Card
Card program budgets often start with the processor contract, which is the most visible number. However, that bill only captures part of what it costs to run a card program.
“The biggest mistake is looking only at the processor invoice,” Matt Carpenter, SVP and market director of Elan Credit Card, an agent credit card issuer, told The Financial Brand. “That’s just one piece of the cost structure. The real expenses include servicing, processing, fraud, credit losses, rewards, technology, compliance, disputes, collections, and portfolio management.”
Carpenter says a practical way to evaluate those costs is by dollars per active account and basis points of receivables or spend. Internal benchmarking cited by Carpenter puts servicing costs alone at roughly $130 to $215 per account annually, before funding, losses, fraud, rewards, and compliance enter the picture.
Other costs may never show up on a vendor bill at all. Dilts says that card production and fulfillment costs climb with chip technology, custom designs, instant issuance, and premium products. And fraud adds chargebacks, provisional credits, and investigation time on top of the direct losses.
Funding is another variable, particularly on the commercial side. Tony Yazzolino, SVP and commercial card and merchant director at Columbia Bank, points to the cost of funds in commercial card programs, particularly when businesses seek to maximize the free float.
Scale Changes the Math
Many costs are fixed or semi-fixed no matter how large the portfolio is. That’s what makes scale an important factor.
“Card programs require a baseline level of technology, compliance, fraud monitoring, vendor support, and staffing regardless of whether the portfolio is small or large,” Dilts says. “If transaction volume and revenue are not sufficient to absorb those fixed costs, the program can become difficult to sustain without strategic growth or a different operating model.”
Larger programs can spread the cost of fraud controls, servicing, rewards, technology, and specialized staff across more active accounts, spending, and receivables. But there’s often more pressure when smaller institutions compete on the same terms as the biggest issuers.
Key insight: “For the vast majority of issuers, credit cards continue to be a very profitable product,” says Kevin Von Holten, director at Cornerstone Advisors, a consulting firm serving banks and credit unions. “Where portfolios can become unprofitable is when community FIs try to match the lucrative offers of the largest credit card issuers in the US. These issuers have room to have such programs based on scale, lower expenses, and higher pricing than what most community FIs can offer.”
Size alone also doesn’t always settle things. Dilts points out that a portfolio with a large number of inactive cards may look substantial while at the same time generating too little revenue to support the infrastructure behind it, and a smaller portfolio with strong activation, manageable fraud, and good expense controls can perform well.
Von Holten also points to another risk factor credit unions and community banks should consider. Smaller banks can also run into trouble when they apply the risk profile and tolerance of secured credit to an unsecured portfolio. If the losses don’t match expectations, that can start the conversation about selling the portfolio.
The Case for Keeping Control
The math doesn’t push every institution in the same direction. For some banks and credit unions that treat cards as a core part of their relationship strategy, direct ownership has some advantages.
“On the commercial card side, we’ve actually seen more banks, especially smaller institutions, looking to launch commercial card programs in the interest of driving fee income while controlling the client experience,” says Yazzolino. “While the landscape has certainly evolved due to elevated interest rates and advancements in fraud tactics, card programs still make sense for many institutions.”
Yazzolino says Columbia Bank views its in-house commercial card program as an integral part of its fee income strategy and also warns that outsourcing can create a relationship gap where poor service may cost the banking relationship or open the customer up to competitors.
“A card program is also a relationship tool,” says Dilts. “If a member uses another institution’s card every day, that other institution gains insight into the member’s spending behavior, digital engagement, and financial needs. Losing top-of-wallet status can weaken the broader relationship over time.”
Key insight: But keeping control only works if the institution is prepared to invest enough to make the program competitive. Von Holten says community institutions can get into trouble when they treat credit cards as something to dabble in rather than a product that requires enough investment to compete effectively.
For any financial institution, the calculation often comes down to scale, capabilities, and commitment. A card program can be a relationship asset, but only if a bank can afford to run it well.
What to Measure Before Deciding
“Financial institutions need to evaluate the entire portfolio, not individual components,” says Carpenter. “Growth, profitability, risk, service, funding, and customer experience should all be measured together.” Carpenter also adds that opportunity cost is often overlooked, and that institutions rarely ask what other initiatives those same resources could support.
Carpenter’s test for management is asking if the bank makes enough money after the true cost of running the program, and whether it would choose to build the same operating model again today.
Profitability on paper may also be a misleading number. Dilts says a program can look profitable until the institution fully accounts for fraud losses, disputed transaction handling, call volume, provisional credits, and staff time. Dilts also points to underestimating fraud and staffing costs as a common mistake.
“Fraud prevention is not static,” says Dilts. “Fraudsters adapt quickly, and financial institutions must be able to respond quickly with real-time monitoring, rule changes, member outreach, and employee training.”
That brings the decision back to what a community bank or credit union is equipped to run.
“What people often get wrong is believing the decision is about control versus outsourcing. It’s about capacity,” Carpenter says. “If the financial institution has the scale and resources to operate a competitive, compliant, and profitable card program, self-issuing can work. If not, the organization may be taking on the complexity of a national issuer without the economics of one.”
Making the Call
Bottom line: A card program is one of the most direct ways a community bank or credit union stays in front of a customer every day. But there is no single portfolio size that easily settles the build vs. buy question. The economics should be weighed against a bank’s capabilities, strategic priorities, and ability to keep investing in the program.
The decision starts with understanding the full cost of the card program and whether those resources could accomplish more elsewhere. For some institutions, that will make an in-house program worth considering. For others, the case for a partner will be stronger.
