Credit unions better serve consumers living paycheck to paycheck, combat financial deserts

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Credit unions consistently serve a higher share of households living from paycheck to paycheck than banks, America’s Credit Unions Head of Emerging Issues and Deputy Chief Economist Curt Long explains in the latest Economic Update video.

The Federal Reserve’s Consumer Finance Survey shows just under 40% of households that use credit unions as their primary financial institution have liquid financial assets of less than two weeks of income, more than banks (at around 35%). 

“This result clearly shows credit unions are at the front lines serving households living in the margins,” Long said.

The update also examines recent research from the Federal Reserve Bank of Philadelphia focusing on changes in branches since the onset of the pandemic. The report found the pace of bank branch closers has doubled since 2019, resulting in a 6% increase in census tracts without a financial institution branch.

When it comes to the institution that closed the last branch in a tract, banks with more than $10 billion in assets created 62% of new banking deserts, despite only having 45% of total bank and credit union branches.

Credit unions closed the final branch in just 8% of instances, while credit unions “cured” banking deserts by opening a branch in a census tract with no previous branches in 36% of instances. This comes while credit unions have only 20% of all financial institution branches.

“When you put these two together, it’s clear credit unions are doing more than any other depository institution to address the needs for financial services in census tracts that other institutions are abandoning,” Long said.

He also shared results from a recent America’s Credit Unions member survey on how proposals such as the CFPB’s credit card late fee and overdraft rules, and the Fed’s debit interchange proposal, would affect non-interest income.

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