Credit unions are mission-driven organizations that serve their members to help them achieve financial wellness. But with high interest rates, it’s important for credit unions to work with their members to fully understand the impact that a high interest rate environment can have on their financial lives.
Credit unions are among the most popular and trusted financial institutions in the country. As member-owned financial cooperatives, they offer a wide range of products and services designed to help people save money and make their lives better. Given that financial wellness is among the many missions of credit unions, high interest rates will impact their day-to-day operations as well as their ability to provide loans and other financial services that consumers need to financially sustain themselves.
Financial wellness means being able to make ends meet—ensuring you have enough money in your accounts to pay bills on time and still have enough left over for groceries and other necessities. But with high interest rates, it’s harder for people to get out of debt and save up money—and that means it’s harder for credit unions to offer services needed to help their members achieve financial wellness.
The higher rates will make credit and loans more expensive, which ultimately takes money out of people’s pockets. This could really impact a lot of consumers, who turn to credit unions for financial services. When interest rates rise, credit unions will be challenged to be more creative and present more options to help members.
According to the Federal Reserve, as of November 2022, consumer credit increased at a seasonally adjusted annual rate of 7.1%. Revolving credit increased at an annual rate of 16.9%, while nonrevolving credit increased at an annual rate of 3.9%. Credit unions provide valuable services to their members, many of which are not available at other financial institutions. With some strategic planning and forethought, credit union members can continue to benefit from the services they need while avoiding additional fees.
What role do credit unions play in helping their members to navigate these rates? It is the responsibility of credit unions to inform their members about credit card and loan debt when interest rates rise. Credit unions should ensure that their members are educated on the debt options available to them.
Learn more about how you can provide Financial Wellness to your members to help them navigate their personal journey and achieve financial freedom.