A coalition of Indiana CUs have developed an automatic savings product tied to auto loans called DriveUp Savings. With the account, you can contribute up to 10% of the amount of your loan payment to a savings account every time you pay your loan. (The amount you contribute is in addition to your loan payment, not deducted from it.) Your savings rate is equal to your loan rate.
Some people have complained that savings programs tied to loans is a band-aid solution to promoting thrift. Others have suggested that the only way you can get Americans to save is to make it automatic, and link it to spending behaviors.
Six Indiana credit unions are piloting the program:
- Members United FCU – July 2008
- Purdue Employees FCU – July 2008
- Three Rivers FCU – August 2008
- Kemba Federal Credit Union – Q4 2008 (ETA)
- Eli Lilly Federal Credit Union – Q4 2008 (ETA)
- VIA Credit Union – 2009 (ETA)
For other financial institutions considering the product, the coalition of credit unions beind DriveUp Savings offers a simple implementation plan and low-cost marketing materials. You can check it all you at their website:
If you want some more information, check out this brief presentation (PDF).
Apparently, uptake was 30% of all new auto loans for one of the pilot CUs. The participating credit unions also predict an increase in- and added stability to deposit portfolios.