Tip Your Hats to the ‘T-Stone’

Increasing numbers of consumers now entrust their financial futures to CUs.

June 13, 2012

Credit union assets surpassed $1 trillion in March.

That, in itself, is news. But perhaps the bigger news is that $1 trillion in assets means increasing numbers of consumers in this country now entrust their savings and their financial futures to credit unions.

That’s how it should be.

Let’s make one thing clear at the outset: Just because the amount of credit union assets is now a number with four commas in it doesn’t mean that credit unions are the new financial behemoth. Banks are still the big dogs on the block—and getting bigger.

After all, total banking assets at year-end 2011 were $13.9 trillion. By comparison, credit union assets were equal to only 7.2% of total bank assets at the end of the year (and, surely, bank assets have grown—just as credit union assets have—since then).

Banks as a whole have gained on credit unions. Ten years ago, at year-end 2001, total credit union assets (just less than $515 billion) was equal to 7.9% of all bank assets ($6.5 trillion).

In fact, the top four banks in the nation at the end of last year—JP Morgan/Chase, Bank of America, Citicorp, and Wells Fargo—individually held more in assets than all credit unions combined.

On the other hand, credit union asset growth is outpacing that of smaller banks, many of which are being absorbed by bigger banks, according to CUNA’s economics and statistics team.

We believe this indicates credit unions increasingly are becoming alternatives to megafinancial institutions as consumers look for local, more consumer-friendly options.

Still, reaching $1 trillion in assets is a milestone—call it the “T-stone”—and it’s definitely a proud accomplishment.

Credit unions reached this point only because of members’ support and confidence. They’re the ones placing their savings in credit unions.

Some members, of course, do so for the better return on their savings—on average about 10 basis points (bp) better than banks on passbook savings, and 15 bp better on a 12-month certificate of deposit, as of last month.

CUNA estimates that in 2011 the direct financial benefits and savings members received from doing business with credit unions—higher returns on savings, lower rates on loans, and low or no fees—totaled more than $6.25 billion. That’s about $68 per member, or $130 per member household.

These numbers are averages. The more that members or households use their credit unions, the more they save.

But others may be doing business with credit unions strictly because they believe a credit union is a better place for them to save their money and borrow when the time is right.

Our polling indicates that 80% of voters view credit unions favorably, compared with 69% who view banks “favorably.” That’s the lowest bank favorability rate we’ve seen since we first began conducting the survey 14 years ago.

Further, when we asked voters “What’s the best place for you to keep your day-to-day savings and checking accounts?”, the responses among all of them were 43% credit unions and 43% banks; 10% said both.

This represents the first time credit unions have been even with banks on this question, rather than behind banks.

We view this as a reflection of gains in consumer awareness credit unions have made since the outrage over Bank of America’s $5 debit fee and the tremendous publicity for credit unions surrounding “Bank Transfer Day” last fall.

So, tip your hats to the “T-stone” sometime soon—especially knowing credit unions arrived at this point because consumers were seeking a better way to save their money.

And that’s how it should be.

BILL CHENEY is CUNA’s president/CEO.