Why Dividend Rates Change
April 10, 2012 | Alliant Credit Union
The Alliant Board of Directors decided to lower the credit union's regular savings dividend to 0.95% APY from 1.00% APY, effective April 1, 2012. Alliant works very hard to maintain one of the highest savings dividends in the nation and, despite the drop in rate; it still maintains one of the highest rates in the nation. We can do this because of our conservative management strategy, low operating costs and the quality of our membership.
A 0.95% APY savings dividend may not seem very high. But, did you know that, at 0.95% APY, Alliant members still earn a rate that is 6.3x higher than the bank national average savings rate of 0.15% APY and 4.8x higher than the credit union national average savings rate of 0.20% APY?1
Historically low investment interest rates and a declining demand for loans put pressure on our dividend rate. The federal funds rate, the bench mark short-term rate, has been at 0% to 0.25% since December 2008. This low rate minimizes what Alliant can earn on our securities investments. Plus, loan demand across the nation - and at our credit union - has weakened.
These two factors reduce the amount we can responsibly pay in savings dividends. To increase short-term income, at the expense of longer-term results, Alliant could make riskier investments and loans. But, that's something we refuse to do. As a not-for-profit financial cooperative, Alliant relies on participation from both savers and borrowers. Borrowing from Alliant is good not only for the credit union, but also for the borrowing member (and, in turn, all members). Alliant loan rates are among the best available in the country.
Meanwhile, many banks have eliminated free checking and now charge their customers a basic maintenance fee to keep their money with the institution. For instance, Wells Fargo Bank will start charging $7 a month for checking accounts in six more states. It introduced those fees last year in 23 states2. And starting April 23, Charter One Bank and Citizens Bank (both owned by Citizens Financial Group) will eliminate its "free" checking accounts and convert those customers to their basic "green checking" account, which will now cost $9.99 a month, up from its previous $4.99 monthly fee. Customers can have the fee waived if they perform a series five qualifying payment transactions per month.3 Conversely, at Alliant we continue to offer our members genuinely free checking accounts and an opportunity to meet qualifications to earn dividends on our High Rate Free Checking account.
If you are looking for savings and retirement alternatives, Alliant can help. Alliant Retirement and Investment Services delivers a trustworthy, full-service financial advisory program providing 401(k) and pension plan rollovers, wealth management, education funding, insurance, investment services and IRA services.4 Call 800-328-1935, option "9," to schedule a no-cost, no-obligation financial consultation to get the assistance needed to reach your financial goals.
Alliant is committed to remain a safe place for you to save and to get loans. Moreover, we rank in the top 3% of the nation's credit unions in "giveback" to our members in terms of high savings dividends, low loan rates and fewer fees.5 And here's the bottom line. At Alliant, we value our members' business and remain committed to help all our members achieve and maintain financial well-being. Going forward, to remain a strong financial institution for our members, we may need to lower our savings dividend rate, to ensure our long-term sustainability and competitive edge. And we look forward to prudently raising our savings dividend rate when market conditions once again allow it.
1 Comparison of Alliant Credit Union's April 2012 savings dividend of .0.95 % APY vs. the bank national average savings rate of 0.15% APY and the credit union national average savings rate of 0.20% APY provided by National Association of Federal Credit Unions in cooperation with Datatrac Corp. as of April 3, 2012. 2 CNNMoney and Winston-Salem Journal. 3 Mybanktracker.com. 4 Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. Non-deposit investment products and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members FR031230-3F6F. 5 Source: Raddon Financial Services, a division of Open Solutions, Inc. -- December, 2011 Raddon Board Report
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