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Dividends: A Huge Differentiator for Credit Unions

Filene recently released an excellent report that tackled this question: “What is ‘the credit union brand’ good for?” It’s a fair question. In the war for retail financial services, the battle line between banks and credit unions has become increasingly murky over the years.

How are credit unions any different than banks? You hear a lot about the not-for-profit structure of credit unions. Or as a member, “you’re an owner.” Even “one member, one vote” is sometimes mentioned. Is this what make credit unions special? Maybe, but none of that really makes any difference to most members.

“With the economic times we’re in, other institutions may be increasing their rates and their fees for services. Instead, you’re reinvesting in your members as a ‘thank you’ for their loyalty.”
— Jim and Terrie B, members
Wright-Patt Credit Union

But here’s a concrete example of “the credit union difference” Filene was searching for: member dividends.

Granted, not all credit unions pay dividends. But for those that do, like Eastman Credit Union, who just distributed a $4 million dividend to its 107,000 members, an average of $37.38. This is the 12th year in a row the credit union has paid a dividend. Since 1998, a total of $37 million has been paid out.

Delta Community Credit Union just paid a $5.0 million “Patronage Reward” to its 177,00+ members. Members with deposits earned a bonus of 4.50% of the total interest they earned in 2008. Borrowers received a rebate of 2.50% of the interest they paid on their loans during the same period.

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And Western Division FCU paid over $1 million to 9,700 members — a whopping $103.10 average payout per member. The dividend equaled 33% of all interest earned on savings, certificates and money market accounts during 2008. It was the sixth year in a row that the Williamsville-based credit union has declared a bonus dividend.

Bottom Line: There is no better way to tell the world you are safe and sound than sharing your profits — something both banks and credit unions can do.

But as a bank, it’s shareholders — not customers — who are the beneficiaries. With credit union dividends, members are directly rewarded for the size of their relationships. And the mass media, happy to report any good financial news in a recession, eats this stuff up.

Key Questions:

  • What will happen to credit union dividends in 2009? WIll fewer credit unions pay out? Will the economy put dividends on hold for a while?
  • Has a bank ever tried something this? Giving back money to its customers on such a wide scale?

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  1. [Editor: This comment is marginally acceptable and barely on-topic but will be published anyway.]

    Great post! Check out the best rates on short term deposits at big banks versus those at select community banks/credit unions from Community banks/Credit Unions continue to offer higher yields on short term deposits to serve as economic engines.


    Florida Central Credit Union 6.01 FL
    First Robinson Savings Bank 6.01 IL
    Union State Bank/Bank of Atchison 6.01 KS
    Communications Federal Credit Union 5.25 OK
    Connexus Credit Union 5.15 WI
    Keystone Bank 5.15 AL
    First New England Federal Credit Union 5.15 CT
    Three Rivers FCU 5.01 IN
    Legence Bank 5.01 IL
    Community Bank of Pleasant Hill 5.01 MO
    Community Bank of Raymore 5.01 MO
    United Heritage Credit Union 5.01 TX


    • ING decreased their highest rate offered by 25 basis points, from a 2.50% APY on a 1 year CD to a 2.25% APY on a 4 year CD.
    • Schwab decreased their 18 month CD rate by 15 basis points, from a 2.65% to 2.50% APY.
    • E*Trade decreased their 5 year CD rate by 30 basis points, from a 1.70% to 1.40% APY.
    • E-Loan increased their 6 year CD rate by 50 basis points, from a 3.50% to 3.70% APY
    • Washington Mutual decreased their 5 year CD rate by 50 basis points, from a 3.00% to 2.50% APY.
    • AARP Financial Savings Center decreased their savings rate by 50 basis points, from a 2.00% to 1.50% APY.
    • Wachovia increased their 17 month CD rate by 15 basis points, from a 1.85% to 2.00% APY.
    • E-Loan currently has the highest rate at 3.70% APY on a 6 year CD.
    • E*Trade currently has the highest savings rate at 3.01% APY.

    Courtesy of BancVue.

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