Why dividend rates change
June 30, 2009 | Alliant Credit Union
The ongoing economic storm has sent shock waves through every financial institution in the world. While some stumbled and fell, Alliant continues to stand strong. We're firmly committed to remain a secure and rewarding place for your hard-earned money to grow. One consequence of the economic downturn is a significant decline in market interest rates. Even so, our savings dividend and loan rates are still among the best in America.
Here are some thoughts from Alliant President Dave Mooney on why our rates change and what it means for Alliant members:
- As market rates decline, so do the yields that we earn on loans and investments, and the rates that we (and other depository institutions) can pay on deposits. Market interest rates have dropped significantly over the past 19 months. The federal funds rate, the short-term benchmark, has declined from 5.25% in August 2007 to between 0% and .25% recently.
- Our savings dividend remains among the highest available in the nation. Take March 2009, for example. Our savings dividend was 3.00% APY. Compare that to the national average1, recorded on March 5, 2009, for credit unions (.58% APY) and for banks (.38% APY). Yes, our dividend rate has declined. But, as this March 5 snap shot shows, we still paid 5x more than the average credit union and over 7x more than the average bank.
- Alliant's Certificate rates are also among the highest available. While some institutions offer higher Certificate rates, be cautious about taking the offer. Some are in serious financial trouble and desperate for funds. Our operating costs are extremely low, and we return all of our earnings after expenses and reserves to our member-owners; therefore, it is likely that institutions that are offering higher rates are doing so at a loss. Also, beware of "new money" offers; at maturity, the institution almost certainly will try to rollover the Certificate at a significantly below market rate in order to earn back the premium they initially paid. At Alliant, we consistently pay high rates and don't play bait and switch.
For over 70 years, we've strived to offer consistently superior financial value. So while market conditions change and other financial institutions come and go, you can count on Alliant to remain a safe place to earn consistently strong returns.
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