Credit Unions Pivot In Response To Rising Rates (Part 2)

Credit unions balance agility and liquidity as they raise rates on what they pay and what they lend while keeping an eye on members’ financial welfare.

Interest rates just keep rising as the Federal Reserve announces one sharp hike after another in its war on inflation. Meanwhile, those rising rates contribute to the pinch borrowers feel as they strive to keep pace with consumer prices whose increases are largely outpacing consumer paychecks.

Credit unions are responding, each in their own way, boosting what they pay in deposits and trying to keep loans affordable. Here’s how some are contending with the environment as they move into a holiday season that could see inflation turn into recession, as is now widely expected.

This is the second of a two-part series. Read on to hear from Advia Credit Union, Community Financial Credit Union, Capital Credit Union, and CommunityAmerica Credit Union. Part one features Dort Financial Credit Union, One Nevada Credit Union, Element Federal Credit Union, and Together Credit Union.

Tapping Into Home Equity

Rob Wilberg rejoined Advia Credit Union ($2.8B, Kalamazoo, MI) last April as vice president of finance. He previously was with the 28-branch, 193,000-member cooperative from 2007 to 2013.

How has Advia Credit Union changed deposit strategies in response to rising interest rates?

Rob Wilberg: We’re working to allow more term options for members based on their comfort level in the market and on their short-term and long-term savings goals.

We’ve introduced new terms for certificates of deposit that allow us some greater flexibility in pricing our overall portfolio. We’re making our money market savings tiers and Ultimate Savings Account — premium rate for liquid savings on high balances of $100,000 and higher — even more competitive, providing a safe haven for depositors.

How has inflation affected savings volume at your credit union?

RW: We’re experiencing a slight lift in average checking and savings balances. However, our greatest lift is in average CD balances. Our members appear to be transacting at normal levels when using credit cards and debit cards for daily transactions. We typically see purchase transactions increase throughout the last months of the year, and we’ll be watching this year to gain greater insight into what impact the economy is having on purchase confidence.

How have rising interest rates affected consumer lending volume at your credit union? How have you changed your rates and products?

RW: We’ve certainly experienced slower mortgage volume over the past several months as interest rates have increased. We’re seeing additional consideration, however, of members accessing their home’s equity for borrowing. To make it even more attractive for them to consider Advia, we’ve introduced new promotional introductory rates as well as waived appraisal fees.

Putting debt on credit cards is more expensive than ever — are you offering special loans or deals for this holiday season?

RW: We maintain low interest rates on our variable-rate credit cards and also offer fixed-rate options on credit cards and signature term loans. One of our holiday features when considering a short-term fixed loan is waiving payments for 90 days, allowing members to get past the holidays before requiring payments. We also help members after the holidays with special balance transfer options to kick off the new year.

How are you educating members about interest rates, paying off debt, budgeting spending, and better saving habits as we head into the holiday season?

RW: We proactively reach out to members who show signs of having higher interest rate debt held elsewhere on auto loans and credit cards. In 2022, we’re on pace to save members more than $12 million on interest payments by transferring higher-rate debt to Advia. It’s one of the best ways we can help our members save. On average, we’re able to save members on average well over $2,500 over the life of their transferred loan.

Extra Pressure To Members’ Savings

Laurie Butz joined 24-branch, 117,000-member Capital Credit Union ($2.3B, Green Bay, WI) as its president and CEO last November. She was joined in answering these questions by the credit union’s chief lending officer, Jon Probst; chief financial officer, Lisa Huguet; and chief marketing officer, Steve Zich.

How has Capital Credit Union changed deposit strategies in response to rising interest rates?

Laurie Butz:
Actions by the Federal Reserve coupled with strong loan growth have prompted us to increase rates on most of our deposit products as well as offer several new CD specials as the liquidity that was built up during the pandemic declines. We also match CD rates in our local market to help retain balances while increasing marketing efforts to drive new member and deposit growth.

How has inflation affected savings volume at your credit union?

LB: Following two years of high savings growth through the pandemic, we are now seeing that slow as members are dealing with high prices on food and at the pump. Unemployment remains relatively low in our market, but the holiday season will bring extra pressure to members’ savings as they realize the high cost of continued inflation.

How have rising interest rates affected consumer lending volume at your credit union? How have you changed your rates and products?

LB: Consumer loan volume has remained high and has been setting new records monthly since December 2021. We have only recently experienced a very small decrease in applications, as is to be expected with seasonal cycles. Since the beginning of 2022, we have increased rates to over 3%. We need to stay competitive in our market with deposit rates, which have a direct effect on our loan rates.

Putting debt on credit cards is more expensive than ever — are you offering special loans or deals for this holiday season?

LB: We run a debt consolidation promotion after the holiday season to capture balances put on credit cards during the holidays. That is our opportunity to offer a better rate and educate members on our other products and services.

How are you educating members about interest rates, paying off debt, budgeting spending, and better saving habits as we head into the holiday season?

LB: We’ll be using our digital channels to communicate the importance of saving and paying down debt. Throughout this holiday season, we’ll look to develop content like blogs, for example, that we can share via email, on our social platforms, and website to better inform our members about the interest rate environment we are in today and how we can help our members be prepared financially this holiday season.

No Material Runoff

Tim Saracini has been with CommunityAmerica Credit Union ($4.9B, Lenexa, KS) in positions of increased responsibility since 2005. The Kansas City cooperative, the largest by assets in both Kansas and Missouri, now has 28 branches and about 280,000 members.

How has CommunityAmerica changed deposit strategies in response to rising interest rates?

Tim Saracini: We’ve started a second money market at a higher rate and since have adjusted it higher. We’ve also come out with CD specials and raised rates on all of our CDs. One product we’ve had that’s always been popular is our high-interest savings account, and it’s very attractive to many of our members right now.

How has inflation affected savings volume at your credit union?

TS: We haven’t seen material savings runoff. We’re focused on directing members into higher yield products on our balance sheet such as money market and CDs. We anticipate savings balances to stabilize in the first quarter of 2023. If rates remain high, pressure on savings balances will resume in April or May of next year.

How have rising interest rates affected consumer lending volume at your credit union? How have you changed your rates and products?

TS: Consumer lending, home equity, auto loans, and credit card balances have all been very good, and we’re increasing rates on all consumer products.

Putting debt on credit cards is more expensive than ever — are you offering special loans or deals for this holiday season?

TS: Although the holidays are a fun time, they can cause financial stress. For years we have offered a holiday loan, and our members with loans can take advantage of our skip-a-pay program. We work hard to make sure our members know they have options when they bank with us, and we try to give them financial peace of mind during the holiday season.

How are you educating members about interest rates, paying off debt, budgeting spending, and better saving habits as we head into the holiday season?

TS: We encourage members to come in and talk to us. We understand everyone has a different life journey, but we offer a variety of products and services to help put them on a path to thrive and achieve financial peace of mind, no matter the time of year.

A Bump Up Option

With nearly a quarter-century of credit union industry experience, Tansley Stearns became president and CEO of Community Financial Credit Union ($1.3B, Plymouth, MI) several months ago. The suburban Detroit cooperative has 13 branches and approximately 85,600 members.

How has Community Financial changed deposit strategies in response to rising interest rates?

Tansley Stearns: We have a large population of members that have been waiting for deposit rates to go up, so we designed a line of time-deposit certificates with high-yield rates while also covering the cost of wire funds in. Most importantly, we created a “bump up” option so those concerned about what might happen next with interest rates can act now.

We know we have work to do to enhance our product line, and using the voice of our members as our guide, we are doing just that. We launched a round-up savings account earlier this year and announced a high-yield savings account available to all members a few weeks ago. There is a strong correlation between savings and financial wellbeing. Increasing the number of members that have at least $1,000 set aside for emergencies is one way we translate philosophy into action.

How has inflation affected savings volume at your credit union?

TS: Inflation is having an undeniable impact on everyone. People are seeing less and less money left over at the end of the month after paying their rent or mortgage, fueling up their cars, covering their utilities, and, of course, buying groceries. Our team has been laser focused on the ways we can help our members through these volatile times.

This was the impetus for the latest product we launched: a high-yield savings account that earns our members 6.00% APY on balances up to $1,000. With this product, our members can deposit what they’re able to during these difficult market conditions, and we put it to work and grow their savings at one of the most competitive rates in the nation.

How have rising interest rates affected consumer lending volume at your credit union? How have you changed your rates and products?

TS: Higher interest rates and inflation leave many with real and immediate budgetary impacts. For us, loan volume is simply one way to quantify the number of human beings we’ve supported as they build the lives they imagine.

One great example of how we can demonstrate our care is through thought leadership. We wrote a piece in The Detroit News about how the cooling housing market brings good news ahead for the major segment of hopeful homebuyers who have been priced out from homeownership over the past few years.

There is no one-size-fits-all solution, and we work with each member individually to understand his or her situation when evaluating our lending decisions.

Putting debt on credit cards is more expensive than ever — are you offering special loans or deals for this holiday season?

TS: We’re more committed than ever to offering our members credit card options that provide low interest rates to help pay off their balances faster. We want to ensure credit cards remain a viable option for our members to build their credit or pay for large purchases without hindering their financial health.

Historically, we’ve also offered a special rate holiday loan. We’ll do that again this year. This small-dollar loan amount goes up to $5,000 with a maximum term of 12 months.

How are you educating members about interest rates, paying off debt, budgeting spending, and better saving habits as we head into the holiday season?

TS: It’s critical that we meet our members where they are, supporting them however they most need our help. We offer an e-Learning Center with modules that span the full spectrum of topics related to building a stronger financial future.

Financial education is most impactful when it connects with moments in time that are relevant and important to the individual. Through our recent partnership with SavvyMoney, our CFCU app now provides our members with real-time access to their credit scores, factors that impact it, and how to strengthen it so they can bring this knowledge into every financial decision they make.

Interviews have been edited and condensed.

November 28, 2022

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