Credit Unions' High Money Market Rates Accelerate Growth

Credit unions are proving their value to members in the form of competitive money market rates. Callahan's First Look data demonstrates how strong rates have led to even stronger share growth.

 
 

Over the past year, the Fed cut rates 275 basis points and the Wall Street bear awoke from a long hibernation. Credit unions had the opportunity to show members why credit unions are not just another financial institution. Giving members better rates than they can find anywhere else has proven fruitful as credit union shares continue to grow at a tremendous pace.

Callahan's 231 First Look Credit Unions, totaling $146.1 billion in assets, have posted outstanding share growth. These credit unions' shares have grown 16.7% in the last twelve months, and 5.6% in the first quarter alone (NCUA just released preliminary first quarter information that shows industry share growth at 17% for twelve months and 5.6% for the first quarter). Money market share growth contributed heavily to this boom.

The First Look credit unions averaged 44.4% money market growth over the last twelve months with 10.7% growth in the first quarter alone (compared with 41.7% twelve month and 10.2% first quarter growth figures that NCUA released). It's easy to speculate that the stock market's post-bubble bursting volatility inspired many to turn to the safety of money market accounts. But it can't be overlooked that aiding this growth was the First Look credit unions' average money market rate of 2.09%; a rate that is over 20 basis points higher than the average bank money market rate of 1.87% at the end of the first quarter according to bankrate.com.

Even within the First Look credit unions it is not difficult to see how strong rates lead to stronger growth. The ten credit unions with the highest money market rates and at least $1 million in money market shares a year ago experienced even higher growth than the industry as a whole. They averaged a money market rate of 2.92%, and grew their money market accounts 51.7% over twelve months and 12.4% during the first quarter.

With short-term interest rates so low, credit unions had a real opportunity to bring back the liquid funds their members hold by giving them greater value for their savings than other financial institutions. Credit unions took full advantage of this opportunity, once again demonstrating why they are the preferred financial institution.

 

 

 

May 27, 2002


Comments

 
 
 
  • money market accounts are the share accounts of the new millenium
    Anonymous
     
     
     
  • Your articles are NOT printer friendly - very frustrating
    Anonymous