Wednesday, July 16, 2014

Overstated Benefits of CU Membership

The credit union industry has overstated the aggregate benefits arising from credit union membership.

Credit Union National Association's calculations are based upon dubious assumptions.

CUNA compares the average credit union savings account yields, loan interest rates, and fees to average bank savings account yields, loan interest rates, and fees. However, people don't make financial decisions based upon averages. In many cases, the best rates are offered by banks and other financial service providers. Pursuing average savings yields, loan rates, and fees would cause consumers to be net losers.

Let's investigate two calculations by CUNA regarding credit cards. CUNA's analysis assumes all credit union members are revolving their credit card balances. However, approximately 60 percent of all credit cardholders are “convenience users” and thereby avoid interest charges by paying off their balances in full each month. This would indicate that CUNA has clearly overstated the interest savings from credit cards to credit union members.

Also, CUNA's benefit estimation points out how much people would save if they were late making their credit card payments; because on average credit unions charge a lower late fee than banks. However, this benefit only arises to people who don't pay their credit cards on time. But if you make your payment on time, you aren't subject to this fee and there is no benefit.

Let's now look at insufficient fund (NSF) fees. CUNA states that credit unions on average charge a lower fee and this provides a monetary benefit to credit union members. However, 85 percent of all consumers did not overdraw their accounts in 2013, according to Ipsos Survey. So, unless you are serially overdrawing your account, there is not any benefit from this fee differential.

So as best I can tell, CUNA's benefit estimation is based upon fuzzy math and dubious assumptions.


  1. Cuna. Cu not accountable.
    They lie about share rates versus deposit rates also.
    I've seen analysis from consultants numerous times at conferences and our cu board planning conference that shows banks actually have a higher cost of deposit than credit unions...and many credit unions I've spoken to agree its true in their local market, not just nationally.
    Finding many large credit unions have tuned out Cuna as much as they've stopped listening to NCUA.

  2. We know we have an average (rather below average) trade association in CUNA, and according to you that makes us net losers. Could not agree more. Based on some of your CU topics - wow - would say this has been average reading as well.

  3. It appears to me that both CUNA and yourself are well versed at using fuzzy math and dubious assumptions. Unfortunately, trade associations on both sides of the aisle are no longer worth the dues they collect.

  4. The 15% who "serially" overdraw their accounts are the people of modest means you keep claiming we don't serve. Isn't that right, Doctor?



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