We are presently in a flight to quality environment.
Money is coming in, away from the scary stock market and equity
But what do you suppose quality means to members? They
might say not volatile like stocks and mutual funds;
they might say insured.
In fact, it means more than both of these. For one, it means something
that may shock them, that they wouldnt readily believe, although
as credit union members they should, it being our duty to keep reminding
them. Quality when referred to in the credit union context
means the members themselves.
Credit unions are not safe and sound, growing, vibrant, dependable
and helpful institutions because the federal government insures
their deposits, or because the federal government helps run a regulatory
agency, or because credit unions do not speculate in certain financial
instruments. They are all the above good things because members
are disciplined savers and disciplined borrowers. Credit unions
are sound because members pay back loans consistently and regularly.
And those members accept a savings rate that is slightly lower than
the rates at which they borrow, allowing funds to run the credit
union. This relationship between credit union and members needs
to be stressed over and over. Never let your members feel that a
credit union is a bank. Credit unions are a community of members.
Their strength is in themselves.
Paying More than We Have To
Accordingly, now would be an excellent time to demonstrate the
credit union relationship. The present flight to quality
environment, that is, removing money from volatile instruments and
depositing them in credit unions, is readily understandable. Stocks
stink at least at credit unions, principal is not going to
We have the opportunity at the moment to accept deposits and to
pay very little back in the form of dividends. Banks, you will note,
are paying exceptionally little on savings. Rates are low, and banks
are taking every advantage to hold wide their spread between lending
rates and savings rates.
But people are hurting, especially people who have to depend on
income from savings to live on. They have seen that income decline
I propose paying not what we can get away with on savings but more
than we need to. And telling members so. Telling them that in these
troubled times we are stretching, in order to help them. Because
we are one side of a relationship that is grounded in helpfulness.
And because likely in the environment we have today, credit unions
are somewhat better off than the collective body of members.
Some time ago, rates began to fall. Credit unions lowered the rates
they paid on savings, but did not work as hard lowering borrowing
rates. In addition, they had high-producing loans in their portfolios.
The result was a kind of windfall for credit unions.
Now is the time to give some back. We will not act as banks; we
will do more than is expected of us.
Stress the Relationship
But at the same time, we should be sure that members get the message
that they are partners in this effort. It is they that make the
credit union strong.
We should be telling them that we will be with them in the long
run if they will be with us in the long run. There is room for creative
thinking here. We might offer even higher rates to members who bring
their mortgages over to the credit union, or offer a five-year CD
With a rate bonus higher than the norm if they bring in their five-year
It is all too tempting to try all sorts of marketing and publicity.
What we really need to do is keep telling members that we can help
them only to the extent that they can help us, that quality loans
result in quality rates on savings.
This environment of very low rates and of moving money out of stocks
and into insured products is a temptation to pay only the bare minimum.
It is also an opportunity to both put needed money into the pockets
of members and also to reinforce the notion of the credit union
relationship. The credit union is members, and is only as good as
members. The one will help the other, and the other has to understand
how that help is supplied.
When both sides understand the relationship, both the credit union
and the members benefit.