Inevitable Interest Rate Hike Will Impact Member Decision-Making

Increased interest rates will force members to alter their financial decision-making processes. Credit unions can prepare for this shift by improving the resources they offer members.


The stage is set for interest rate hikes, giving credit unions an opportunity to demonstrate their mission: providing members with expert and unbiased financial advice.

In the aftermath of 9/11, the message from Washington to America was "go shopping." Consumers listened. Higher consumer debt levels - on a relative basis - was the result of the 45-year low rate of 1 percent.

The Fed finally raised the benchmark funds rate, increasing it by a quarter of a percentage point at both their June 30 and August 10 policy meetings. The current market is preparing for further interest rate increases.

Statements made last week by Federal Reserve Chairman Alan Greenspan and Atlanta Bank President Jack Guynn reinforced to the financial markets their support for further rate increases. Acknowledging the recent "soft patch" in job growth, both officials reiterated their intention to "stay ahead of inflation" and keep the Fed in a neutral setting.

Credit Unions Need to Advise Members with Changing Economy
Credit unions need to recognize the impact on their members of the Federal Reserve's decisions and act accordingly. Members' decision processes will be very different than it was a year ago. With the current level of consumer debt and the rising interest rates, more members will be searching for financial answers in future planning.

Today's leading credit unions have leveraged the latest technology and added to their websites financial planning and educational calculators. These include complete with information content zones that cover topics as wide-ranging as:

  • debt consolidation
  • lease versus buy decisions
  • college cost planning
  • investments

These tools provide a resource to members and allow credit unions to disseminate more information than a brick and mortar setting. Calculators have proven to be a "win win" for credit unions and their members.

For more information on how you can better serve your member and improve your website with calculators call Jon Jeffreys at 800-237-5678.



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Sept. 13, 2004


  • This is analysis worthy of a CFA candidate.