Research highlights the credit union difference

Credit unions have far less academic research on them than banks do. Many studies lump banks and credit unions together. America’s Credit Unions is trying to fix those problems. In the latest Economic Update, Senior Economist Dawit Kebede highlights the academic research the organization is supporting and what it tells us about the credit union difference.

Keeping them honest

More credit unions means lower rates. Kebede details a pair of studies about the impact of credit union market presence on bank rates. One shows that for every 10% more credit unions have on deposit, nearby banks lower their auto lending rates by 1%. The other study discusses how credit unions impact post-merger banks. It notes that areas with limited credit union presence face, on average, higher rates when banks merge due to more market power. However, when there are more credit unions, post-merger banks actually lower their rates to remain competitive.

Serving the underserved

"Credit unions are champions of low-income communities,” says Kebede. He dives into a study by Rosen and Tang, which looked at Community Development Financial Institutions (CDFIs). According to the study, credit unions are CDFI certified at a 3-to-1 ratio versus banks.

A separate study by Wilkinson found that residents of low-to moderate-income neighborhoods were less likely to be delinquent on credit cards and small-dollar personal loans if they were credit union members. The study also noted that credit unions keep those residents away from payday lenders and expand their access to formal credit.

Helping members and making an impact

Chen and others studied the difference in credit union pricing for bank sales to credit unions and credit union mergers.  

“She found no notable difference in interest income and expenses,” says Kebede. “This suggests that when credit unions take on bank assets, liabilities, and customers, it doesn’t really change their member-first pricing.”

Another study also found that credit union presence affects legislation. It specifically looked at West Virginia’s law banning bank sales to credit unions. What it found was striking. For every additional branch in a lawmaker's district, the odds of voting to pass the ban went down 3-4%.

Prudent institutions, prudent members

Credit unions prioritize safeguarding their members’ life savings and being prudent with their spending. Research discovered that credit union members were also more likely to be prudent with their finances. During the pause on student loan payments from 2020 to 2023, debt balances increased by 22% across the country—and delinquencies rose with it. However, credit unions did not see this same rise in debt and delinquencies.

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