Tuesday, January 16, 2018

CU Tax Subsidy Going to Wealthy Savers

A Winston-Salem (NC) credit union's certificate of deposit promotion targets wealthy savers.

Allegacy Federal Credit Union is advertising in large bold font a seven-month certificate with an annual percentage yield (APY) of 1.15 percent for balances of $250,000 or more.

Buried in the fine print of the advertisement the credit union states that the seven-month certificate is a tiered rate account. The highest rate is only available for savers meeting the highest tier requirement. To get this favorable rate, funds must not come from an existing Allegacy account.

In addition, a minimum deposit of $1,000 is required to open this certificate. Unfortunately, a majority of Americans could not avail themselves of the lowest tiered requirement with an APY of 0.95 percent, because they don't have enough in savings to open the account.

While credit union industry's tax exemption is tied to its public policy mission to meet the financial needs of people of modest or small means, it appears that Allegacy is diverting its tax subsidy to wealthier savers.

This is another illustration that the credit union industry's tax exemption is poorly targeted and is going to people who don't need taxpayer subsidized savings products.

Below is the ad (click on image to enlarge).


3 comments:

  1. There are so many examples of just the opposite. It is a shame that you use isolated examples to try to paint a larger story that just is not true.

    ReplyDelete
    Replies
    1. It’s true alright. The larger credit unions are banks with preferential tax treatment.

      Delete
  2. Most often credit union deposit dividends are less than what the U.S. Treasury is paying. And still members save at the credit union. It begs the question how a non-profit can pay less dividends than the Treasury. The shame is credit union members as owners are receiving less than market rate dividends. The member/owners gets screwed on dividends and management gets greased with a BOLI (Bank Owned Life Insurance), 457, stadium luxury sport (corporate) season pass, etc.

    ReplyDelete