The Build vs. Buy Dilemma: Navigating Credit Card Portfolios in 2026

Card programs are far from being a relic of the past. In fact, they are thriving. By 2025, balances at federally insured credit unions climbed by 3.1%, reaching a staggering $87.8 billion. This growth underscores one undeniable truth: card programs remain a cornerstone of strategic importance for financial institutions. However, there is a catch. While the opportunity is growing, the complexity of managing these programs is accelerating even faster. What used to be a straightforward product line has transformed into a high-stakes ecosystem requiring expertise in unsecured lending, fraud prevention, digital servicing, and constant regulatory compliance.

The Shift from Product to Relationship

We need to stop thinking about credit cards as just another plastic rectangle in a customer's wallet. As Nicole Dilts, vice president of commercial solutions at MSU Federal Credit Union, recently noted, these programs have evolved into a critical nexus of the member relationship. They aren't just about payments anymore; they are the heart of the digital experience, a driver of revenue strategy, and a primary framework for fraud prevention. For community banks and credit unions, the central question for 2026 isn't just about offering a card—it's about whether they have the resources to sustain the sophisticated infrastructure required to run it.

The "Processor Invoice" Trap

When financial institutions begin evaluating their card program budgets, they often make a fundamental mistake: they look primarily at the processor contract. While that invoice is the most visible expense, it represents only a fraction of the total cost of ownership. Matt Carpenter, SVP and market director of Elan Credit Card, points out that the real financial weight of a program includes servicing, fraud mitigation, credit losses, rewards programs, and the grueling demands of compliance and collections.

To put this into perspective, internal benchmarking suggests that servicing costs alone can range from $130 to $215 per active account annually. And that is before you even consider the cost of funding, fraud losses, or the rising price of physical card production. With the advent of advanced chip technology, custom designs, and the expectation of instant issuance, the overhead for even a small portfolio is becoming a significant burden.

The Brutal Reality of Scale

In the world of credit cards, scale isn't just an advantage; it’s a survival mechanism. There is a baseline level of technology and staffing required to stay competitive, regardless of whether you have 1,000 or 100,000 accounts. As Dilts explains, if your transaction volume doesn't generate enough revenue to absorb these fixed costs, the program becomes a drain on the institution rather than an asset.

This is where many community financial institutions (FIs) hit a wall. In an attempt to compete with the lucrative rewards and low rates offered by national giants, smaller FIs often find themselves with razor-thin margins. The big players can afford those perks because their massive scale lowers their per-account expenses. Furthermore, as Kevin Von Holten of Cornerstone Advisors points out, smaller banks often run into trouble when they apply the risk tolerance of secured lending to an unsecured card portfolio. When losses exceed expectations, the conversation quickly shifts from growth to selling the portfolio.

The Strategic Case for Owning the Experience

Despite the challenges, the "build" or in-house model still has its champions. For many, it comes down to maintaining the client relationship. On the commercial side, some smaller institutions are actually launching their own programs to capture fee income and, more importantly, to control the user experience. Tony Yazzolino of Columbia Bank argues that outsourcing can create a "relationship gap." If a customer receives poor service from a third-party partner, it’s the bank’s reputation that suffers.

Keeping the card program in-house also provides invaluable data. Every time a member uses your card, you gain insight into their spending habits and financial needs. If they use a competitor’s card for their daily coffee or groceries, you lose that "top-of-wallet" status and the digital engagement that comes with it. Over time, this can weaken the entire banking relationship.

The Capacity Test: Build or Buy?

Ultimately, the decision to build or buy shouldn't be based on a desire for control alone. It must be based on capacity. Matt Carpenter suggests a simple but high-stakes test for management: Does the bank make enough money after accounting for every single true cost of the program? And more tellingly, if you were starting from scratch today, would you choose to build this exact same operating model?

Fraud prevention is perhaps the best example of this capacity requirement. It is no longer a set-it-and-forget-it function. Fraudsters are adapting in real-time, requiring FIs to respond with constant monitoring, rule changes, and employee training. If an institution doesn't have the scale to invest in this level of agility, they are essentially taking on the risks of a national issuer without the economic protections that come with it.

Finding the Right Path for 2026

There is no one-size-fits-all answer. For some, the card program is a vital relationship asset worth the high cost of entry and maintenance. For others, the opportunity cost—the things they could be doing with those resources instead—makes partnering with an agent issuer the smarter move. As we move into 2026, the goal for every community bank and credit union should be to look past the surface-level profitability and evaluate the entire ecosystem of their portfolio. Whether you choose to build or buy, the key is to ensure you aren't just dabbling in cards, but competing to win.