Banking Blog

Finance Blogs » Banking » Credit union members immune to bad economy?

Credit union members immune to bad economy?

By Claes Bell, CFA · Bankrate.com
Thursday, November 4, 2010
Posted: 4 pm ET

If everyone was a credit union member, would we be be toasting the new economic recovery instead of wallowing in the same malaise we've been mired in since 2009? A recent survey shows consumers who bank at credit unions have a more positive view of their personal finances than those who don't:

According to credit union data released from the (Discover U.S. Spending Monitor) in September, 38 percent of credit union members rate their personal finances as good or excellent, compared to 30 percent amongst noncredit union members surveyed. Just 17 percent of credit union members rate their finances as poor, while 29 percent of noncredit union members feel the same way.

Both groups also differ when it comes to whether their personal financial situation is getting better or worse; 48 percent of credit union members feel their finances are worsening compared to 51 percent of noncredit union members, a 3-point difference. Twenty-one percent of credit union members feel their finances are getting better compared to 19 percent of noncredit union members, a 2-point difference.

Credit union members seem to be weathering the tough economy better than nonmembers

Credit union members are in better shape financially. (Photo by Ildar Sagdejev)

What's more, credit union members report an objectively better financial situation than their bank-only counterparts. More credit union members report having money left after paying monthly bills (52 percent vs. 44 percent) and more willingness to spend on discretionary items and home improvements (15 percent vs. 14 percent).

The correlation between doing well financially and belonging to a credit union is interesting, but it's hard to know if there's any causal relationship. In other words, does belonging to a credit union give members such a big financial advantage over nonmembers that they'll be that much better off financially, or are people who are better off financially just more likely to join credit unions?

Sure, credit unions typically offer more generous interest rates on both loans and savings accounts than their bank counterparts and to charge less in fees (NSF fees are about $5 less at credit unions than at banks). But I doubt those benefits are enough to explain such wide gaps in consumers' sense of financial well-being.

More likely, I'd say, is that because credit unions can't typically spend as much on marketing as their bank counterparts, those consumers who do belong to credit unions tend to have sought them out because of those more generous rates. Also, credit unions don't have the resources to put an ATM on every street corner and a branch on every street like some of the larger banks, forcing consumers to give up some measure of convenience to do their banking at a credit union.

It follows then, that credit unions are attracting a consumer who is more proactive and diligent when it comes to financial matters, and one who is willing to do a little more legwork and sacrifice some convenience to get credit unions' better deals.

Regardless, the upshot here is if you're a member of a credit union, you're in good company financially. Why do you think credit union members are doing so much better than nonmembers? Is belonging to a credit union that much more of an advantage?

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
8 Comments
dman1287
November 10, 2010 at 4:32 pm

Actually I would like to see how many people who are part of a Credit Union now days are members of more than one bank? Since most people who are financially savvy tend to explore the "best option" for their financial needs--do they always side with their CU?
How much loyalty is their?

Claes Bell
November 10, 2010 at 4:19 pm

Interesting point! I had a thought along the same lines when writing the blog, but credit union eligibility is so broad these days, I wasn't sure if that bias would still be evident.

dman1287
November 10, 2010 at 4:19 pm

In the last 2-3 years many smaller business have been struggling, while larger ones are able (as a whole) to handle financially difficult challenges. And the employees that work for those companies are able to maintain a more regular INCOME Just a thought that wasn't addressed in the article, weren't most Credit Unions in the past started by a CO-OP connected with a Company/Corporation/ Government Agency that wanted to provide financial products to their employees? Consider that most of America DOESN'T work for a large corporation, thus the statistics might read as though "Credit Union Members rate their personal finances as good or excellent"--especially when you get PAID every month.
Could the answer be in part related to these facts?

Claes Bell
November 05, 2010 at 2:43 pm

Good point. The credit union COOP network you're talking about has 9,000 deposit-taking ATMs in the U.S. and Canada. Still, the biggest banks probably have more; Bank of America has 18,000 ATMs in the U.S. alone, according to its information page.

Tim B
November 05, 2010 at 2:31 pm

I disagree with the statement

"Also, credit unions don't have the resources to put an ATM on every street corner and a branch on every street like some of the larger banks, forcing consumers to give up some measure of convenience to do their banking at a credit union."

I live in San Diego, CA and use a Fresno, CA credit union. They have something called a "co-op" network on my atm card and I can go to just about any credit union ATM and make deposits is most as well. I think the ATM convienience is the main reason I bank at a credit union.

Claes Bell
November 05, 2010 at 9:25 am

I think it would, just because there is a real financial advantage to belonging to a credit union in terms of better rates, more lenient fee structures and less aggressive marketing of services that aren't always in the best interest of the consumer. Those factors I think do have a real impact on financial well-being. But I think you're right in doubting the gap in consumer sentiment between members and nonmembers would be so high.

JR
November 05, 2010 at 8:21 am

I think keith may have a point. Better educated people will seek out better situations for themselves and are not likely to get taken in by gimmics or allow the abusive treatment one gets from for profit banks that only have thier shareholder's interest in mind. These people can see the value of being with an institution that will treat them fairly, which is what a credit union is all about.

Keith Leggett
November 05, 2010 at 7:39 am

The results probably reflect the difference in the demographic profile of credit union members versus individuals that are not members of a credit union. According to CUNA surveys, credit union members are more likely to have a college degree, less likely to be retired, and have higher incomes than nonmembers. These factors may account for why credit union members are more likely to rate their personal finances as excellent or good.

If you control for demographic characteristics of the respondent, would belonging to a credit union still be statisticaly significant?