How credit unions can survive rising interest rates

The Federal Reserve raised interest rates three times in the last year or so. With a strong economy and continued low unemployment, expect rates to continue their upward trajectory. In response, banks and credit unions will need to change how they market their deposit products.

In a low interest rate environment, it’s natural that deposit products will fall out of favor with consumers. The average interest rate paid on a savings account is 0.07%. For an interest-bearing checking account, the average is 0.04%. Money market accounts and CDs pay only slightly higher rates. For the average consumer, it’s pretty paltry. For many, it might as well be zero.

When interest rates are higher, banks and credit unions attract more deposits. In 2007, when the federal funds rate was more than 5.00%, nearly one in four consumers had a CD. But in 2017, only 15% had one. In 2007, 21% of consumers had a money market account versus 17% today.

According to research from Raddon, a Fiserv company, few consumers have plans to buck this trend — even if rates rise. Raddon asked consumers if they planned to open a CD or money market account in the next 12 months, and based on the findings, there will be a 40% decrease in demand in CDs and a 50% decrease in both money market- and savings accounts.


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