Credit unions' excess liquidity can benefit members' financial health.

Credit Unions’ Excess Liquidity Can Serve Members’ Financial Health

Millions of Americans are negotiating their way through 2020 and into the new year as best they can, worried about their financial health. Many are struggling to pay rent after being furloughed or let go from a position that provided a primary source of income. They may have even had a solid sense of job security, until circumstances suddenly changed. 

Many credit unions feel or have felt similarly as an organization. With the onslaught of COVID-19 this year, however, Americans started packing away their savings at astonishing rates – a record-setting 33.7 percent in April, and then dropping to a still-surprising 14.3 percent rate in September. Share balances for America’s credit unions grew at near-unforeseen levels at the start of the pandemic and subsequent lockdowns. Deposit balances increased 16.5 percent year-over-year. 

One can understand credit union executives’ uncertainty about the coming months’ balance sheet growth when COVID-19 changed everything in early March. Fortunately for many credit unions, the worry was somewhat tempered. Thanks to various federal relief programs, a looser federal monetary policy, and tolerant loan forbearance programs, the U.S. economy, for all its bumps and bruises, has held tight for many credit unions. While many consumers have taken a devastating hit to their lives and overall financial health, funding from personal aid checks and unemployment benefits have poured into member accounts, and millions of other Americans kept their jobs by working from home and bringing in income. 

How Credit Unions Can Improve Financial Health with Extra Liquidity 

Despite what many surface-level income statements say about credit unions, such top-level metrics undercut many positive signs, including the fact that credit unions continue to support their faithful members. Credit unions aren’t simply setting aside money in order to cover future losses; in fact, many are strategically reworking their income to help members lacking in financial health.

After all, isn’t the main mission of a credit union to reinvest profits back into the organization? Banks or predatory lenders’ sole, bottom-line obligation is to satisfy stockholders or purposely get customers stuck in a debt trap. Cooperatives can better their business by keeping interest rates on loans lower than other financial institutions or increase interest paid on deposits. Ultimately, the credit union’s purpose is to provide better, more affordable products and services to their faithful membership. Essentially, the better the service, the more loyalty and business you should receive! 

According to the true credit union philosophy, there are two primary ways a cooperative’s profit should be handled: 

  1. A profit should be reinvested in the credit union community. There are numerous ways this can be done: by making repairs and improvements to the buildings themselves, updating computer software systems, or enhancing organizations by hiring more staff. Another reinvestment can look like taking part in supporting your local community by volunteering the credit union’s time and money. 
  1. Apply to lower borrowing costs. This is a no-brainer for credit union members and the loan borrowers among them. If a credit union has some extra liquidity to work with, it can lower interest rates on loans and pay higher interest on deposits.  

Reinvesting in your credit union with QCash Financial’s digital small dollar loan platform addresses multiple operational assets from which you can benefit. The financial services industry is moving quickly in the fintech space, and credit unions do not want to be caught behind the ball in terms of digital relevance  or member satisfaction.

Our SaaS-based, digital small dollar loan platform is fully-customizable to your credit union’s terms and provides a convenient way to get your members a financial lifeline to ultra-quick liquidity when and where they need it, in just six clicks in 60 seconds. For all those hard-working Americans we spoke about with sky-high savings rates, let’s work together to ensure  life’s emergencies don’t hit them too hard in the wallet, especially in these challenging times.

If you would like information on QCash Financial’s digital small dollar loan platform, visit us at https://qcashfinancial.com/solution

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