Cost-consciousness is the new recession luxury

DES PLAINES, Ill. (5/06/09)--The recession has many Americans re-evaluating the way they spend their hard-earned dollars. About half (53%) of respondents to a recent Gallup poll said they are spending less, and 32% predict this behavior will become the new normal pattern once the recession is over (creditfyi.com Apr. 28).

The necessity vs. luxury perception battle had been moving in the luxury direction for decades, but the looming recession has reversed the trend. A report released April 23 from the Pew Research Center Social and Demographic Trends Project revealed that many items previously perceived as "necessities" are getting booted to the luxury list.

The Pew survey showed the number of respondents who categorize common household items--microwave oven, TV, air conditioning, dishwasher, and clothes dryer--as a necessity has dropped sharply from 2006. Further, the percentage of Americans who consider a TV a necessity is the lowest it has been since the question was first asked more than 35 years ago.

Four of five survey respondents have taken at least some belt-tightening measures during the current economic crisis. Here are a few examples of scaled-back spending:

58% switched to less expensive brands or to discount stores;

28% reduced spending on alcohol or cigarettes—two goods often labeled recession- proof;

24% cut back--or eliminated--their cable or satellite TV subscription; 22% followed suit with their cell phone plan;

21% plan to try out their green thumbs and grow veggies;

20% started performing home repairs or yard work they previously hired out; and

16% got rid of unwanted items by holding a garage sale or listing them on the Internet.

For more information, read "Tough Times Series: Steps Before, During Layoff Make It Easier to Cope" in Home & Family Finance Resource Center.

courtesy of cuna.org

CUs have good stories to tell--Crear to U.N. group

NEW YORK (5/6/09)--Despite continuing challenges facing U.S. credit unions, financial cooperatives worldwide have a "good story to tell" in terms of stability, member service and their ability to "spread" financial risk, according to Pete Crear, World Council of Credit Unions (WOCCU) president/CEO.

Crear took the credit unions' positive message last week to a United Nations (U.N.) meeting of global economic experts on "Cooperatives in a World in Crisis."

"Credit unions have not contributed to the creation of the global economic crisis," Crear told participants representing 13 countries. "However, through their roles as member-owned and operated financial cooperatives, credit unions are contributing to the healing process."

The group met for three days to examine the role and capabilities of cooperatives, including credit unions and financial cooperatives, to counter the effects of the ongoing economic downturn.

Participants, comprising primarily academics and cooperative association executives from the U.S. and other countries, submitted reports before the meeting, outlining the role of cooperatives in their countries. To view WOCCU's report to the U.N. work group, use the link.

Crear's paper evaluated how credit unions in nine member countries and regions have been affected by market disruptions due to the financial crisis, their inclusion in financial rescue programs and changes made to deposit insurance for both banks and credit unions relative to the crisis. To WOCCU's knowledge, credit unions have not accepted government funds for bailout purposes, Crear said.

"Credit unions' overall approach of accepting member deposits, providing loans to members and generating strong capital bases has kept the majority of them out of harm's way as bad investments take their toll on the for-profit financial services industry," Crear said. "Their conservative practices are driven by a philosophical mandate to place member needs ahead of institutional profits."

WOCCU also supported the U.N.'s International Year of Cooperatives, proposed for 2012. The U.N. celebrated its first International Day of Cooperatives in July 1995 to recognize and reaffirm cooperatives' role in economic, social and cultural development. The event would expand that recognition to better draw attention to major global issues and the role cooperatives can play in addressing them, Crear said.

"Declaring 2012 as the International Year of Cooperatives would shine a more intense light on cooperatives and credit unions worldwide," Crear said. "Such a 'blessing' by the U.N. and its member governments would lead to greater support for cooperatives and credit unions, enabling them to better serve members."

Last week's meeting was held in response to U.N. resolution 62/128, "Cooperatives in social development," which introduced the concept of the International Year of Cooperatives. The resolution also urged the strengthening of cooperatives worldwide and the development of increased public awareness of their overall socio-economic impact.

courtesy of cuna.org

Buffalo News: Many prefer CUs to banks

BUFFALO, N.Y. (5/5/09)--Many consumers prefer credit unions to banks, according to The Buffalo News (May 4), which says attractive rates and friendly service are helping credit unions to grow.

The article explains credit unions' history. In it, Patrick Keefe, vice president of communications at the Credit Union National Association, explains the structure and philosophy of credit unions.

"Every saver in the credit unions owns the credit union, and it doesn't matter the amount they have in a credit union. Everybody has an equal share," Keefe told the publication.

"Credit unions are democratically elected, volunteer-led, cooperatively owned and not-for-profit," Keefe noted. "That doesn't mean that credit unions do no realize a net return after paying all their bills. The real difference is a bank exists to maximize profit for shareholders. Credit unions exist to maximize service for members."

The article makes mention of area credit unions such as Buffalo Metropolitan FCU, Buffalo Postal Community FCU, St. John Buffalo FCU, Cornerstorne Community FCU, and Kenmore N.Y. Teachers FCU.

The newspaper article also discusses credit unions' focus on members, their difference from banks and the fact that credit unions are gaining momentum by improving their accessibility.

courtesy of cuna.org

L.A. Times: CUs most misunderstood banking bargain

LOS ANGELES (5/5/09)--Nonprofit cooperatives such as credit unions are the most misunderstood bargain in banking, according to a Los Angeles Times article.

Although credit unions offer higher rates for deposits, lower costs for loans and reduced fees for overdrafts and checking accounts, many consumers are confused about how to go about banking with one, the article said (May 3).

"Many consumers have an old-school notion that credit unions are always exclusive clubs, only open to employees of a single company, members of a particular church, union or profession. But with many credit unions that's no longer the case," the article continued.

To help consumers find a credit union, the article cited the locator tool on the Credit Union National Association's consumer web page, www.creditunion.coop, as a resource.

The article's author, Kathy Kristof, said she conducted a search of credit unions in 10 minutes and found five that could have accepted her, based on geography alone. Working as a teacher, engineer, broadcaster or public worker could yield access to a dozen credit unions or more, Kristof said.

Kristof also noted that deposit rates are 25% better at credit unions than at banks and six of the top 10 earning checking accounts offered through www.checkingfinder.com were credit union accounts.

courtesy of cuna.org

CU savings rise, loan growth to fall

MADISON, Wis. (5/5/09)--The credit union movement's capital-to-asset ratio fell to 9.58% in March from 10.26% in February as credit unions recognized the costs of the Corporate Stabilization Plan, according to Steve Rick, senior economist with the Credit Union National Association (CUNA).

With earnings expected to be weak and savings growth strong, the capital-to-asset ratio could fall below 9% later this year, Rick added.

Credit union loans outstanding decreased 0.1% in March, but rose 0.6% for the first quarter of 2009, according to the March CUNA monthly sample of credit unions.

Fixed-rate first mortgages rose 1% during March, followed by increases in adjustable-rate mortgages (0.5%), used-auto loans (0.4%), and other mortgages (0.1%). Declining in March were other loans (4.1%), home equity loans (1.1%), credit card loans (0.7%), and unsecured personal loans (0.6%).

Credit union savings balances grew 1.2% in March, the same rate as during March of last year. Savings growth for the first quarter of 2009 was 5.7%, compared with 5% for the same period last year. Growing in March were money market accounts (3%), regular shares (2.5%), one-year certificates (1%) and individual retirement accounts (0.7%). Share drafts declined 3.3% during March.

"During the first quarter, credit union savings balances rose 5.7%, up from the 5% recorded in the first quarter of 2008," Rick said. "U.S. households are changing their financial behavior by saving more, spending less, and trading down to less expensive substitutes.

"Households' decline in spending is reflected in credit union loan growth numbers," he added. "For the first quarter, credit union loan balances rose 0.1%, down from 0.4% reported last year. For the full year, we expect loan growth to fall to 6%, the slowest since the 5.8% reported in 1998."

The movement's overall capital-to-asset ratio decreased to 9.58% in March from 10.3% in February. The total dollar amount of capital ended the first quarter at $83 billion, a decrease of 6.5% from the previous month.

The loan-to-savings ratio decreased to 78.8% in March from 79.9% in February. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--remained at 20%.

Credit union 60-+-day delinquencies were 1.54% in March, an increase from 1.48% in February.

"Credit union loan quality deteriorated further in March as the overall loan delinquency rate crossed over 1.5% to reach 1.54%," Rick said. "With the unemployment rate expected to reach double digits over the next year, the delinquency rate is expected to climb over 1.75% in 2009."

courtesy of cuna.org