No dividends from Credit Unions in 2020.

dxhound2005 · 31-12-2020 8:15pm #1

Money has been piling in to Credit Unions during the year. It would probably have been a lot more if they did not have such low limits. As far as I can tell none of them are paying a dividend. The Central Bank advised not to.

https://www.rte.ie/news/business/2020/1217/1185031-savings-and-loans-gap-a-challenge-for-credit-unions/#:~:text=Savings%20levels%20on%20the%20rise,%E2%82%AC4%2C700%20over%20the%20period.

In round figures €16 billion deposits in Credit Unions, €120 billion in the associated banks, and €20 billion in State Savings. A lot of money making nothing or next to nothing. But it's safe, and that is what people want.

CIP4 · 01-01-2021 12:46am

Yes got a letter from my local credit union to say there is no dividends being paid for this year. First time I can remember that happening in recent times anyway always got something even if it was only 0.3% or 0.5% better than nothing. My credit union has a 50K savings limit which I think they only introduced this year.

Mach 3 · 01-01-2021 4:19am

CIP4 wrote: »

Yes got a letter from my local credit union to say there is no dividends being paid for this year. First time I can remember that happening in recent times anyway always got something even if it was only 0.3% or 0.5% better than nothing. My credit union has a 50K savings limit which I think they only introduced this year.

You will be getting a phone call/ letter if you go over the threshold. Heard of one Credit Union branch reducing limit to 15k. Anything above that had to be withdrawn.
30k where we are but the tellers are unsure if that threshold will stay.
Strange times.

CIP4 · 01-01-2021 12:19pm

Mach 3 wrote: »

You will be getting a phone call/ letter if you go over the threshold. Heard of one Credit Union branch reducing limit to 15k. Anything above that had to be withdrawn.
30k where we are but the tellers are unsure if that threshold will stay.
Strange times.

Yes the is a note up in our one once your account balance reaches 50k they will no longer accept standing orders/transfer or lodgements into your account.

I thought 50k was a fairly low limit 15k and 30k is outrageous low. It’s mad that they literally just don’t want your savings.

The J Stands for Jay · 01-01-2021 12:22pm

CIP4 wrote: »

Yes the is a note up in our one once your account balance reaches 50k they will no longer accept standing orders/transfer or lodgements into your account.

I thought 50k was a fairly low limit 15k and 30k is outrageous low. It’s mad that they literally just don’t want your savings.

Credit unions were never set up for savings, they were set up to loan money to members.

Bass Reeves · 01-01-2021 12:31pm

CIP4 wrote: »

Yes the is a note up in our one once your account balance reaches 50k they will no longer accept standing orders/transfer or lodgements into your account.

I thought 50k was a fairly low limit 15k and 30k is outrageous low. It’s mad that they literally just don’t want your savings.

CU lost there reason d'etre 15-20 years ago. Originally they were set up to give competitive loans to ordinary people. Bank and personal lending rates from cars to washing machines and TV's were often borrowed for in the 70's and 80's.

Bank and Bowmakers lend at 16%+ misting up at near 20%ehen deposit rates were 4-6% and mortgage lending was 7-9%. Credit unions set themselves up out of community centers to give affordable borrowing at 1%/month on decreasing loans.

However from the mid/late90's they became substantial lenders. However they never followed interest rates down and failed to lend cheap enough.

At present CU are no cheaper if not more expensive to borrow from especially if the enforce the deposit lending ratio of 4-1. Because they failed to reduce rate big car companies started there own banks which not just lend to new car buyers but second hand ones as well.

Red Silurian · 01-01-2021 12:39pm

Bass Reeves wrote: »

CU lost there reason d'etre 15-20 years ago. Originally they were set up to give competitive loans to ordinary people. Bank and personal lending rates from cars to washing machines and TV's were often borrowed for in the 70's and 80's.

Bank and Bowmakers lend at 16%+ misting up at near 20%ehen deposit rates were 4-6% and mortgage lending was 7-9%. Credit unions set themselves up out of community centers to give affordable borrowing at 1%/month on decreasing loans.

However from the mid/late90's they became substantial lenders. However they never followed interest rates down and failed to lend cheap enough.

At present CU are no cheaper if not more expensive to borrow from especially if the enforce the deposit lending ratio of 4-1. Because they failed to reduce rate big car companies started there own banks which not just lend to new car buyers but second hand ones as well.

Disagree... I have a personal credit union loan that I took out to pay for my wedding at 6%APR the banks wouldn't look at me at the time I took it out, 3 years in and haven't missed a payment yet... There's definitely still a market for the credit union I think

[Deleted User] · 01-01-2021 12:49pm

From what I saw CU rates were significantly higher than other lenders. Lowest rate (excluding cars) was approx 11% when KBC were approx 6%. An Post is cheaper still.

Back in the day there were a lot of volunteers, think this has changed with a move to employees.

CU may not suit the current climate. When a financial institute cannot lend (too expensive to maintain its services) it will be in trouble.

Bass Reeves · 01-01-2021 2:29pm

colmtheperson wrote: »

Disagree... I have a personal credit union loan that I took out to pay for my wedding at 6%APR the banks wouldn't look at me at the time I took it out, 3 years in and haven't missed a payment yet... There's definitely still a market for the credit union I think

A wedding is a once off event it is not the CU's day to day lending. Most CU are lending at 7%+. Because now there is substantial savings in CU's there is a large cohort of people with substantial savings. There choice when borrowing maybe 10k for a car over 3 years is give 30 euro a week to a CU for the benefit of borrowing 10 k often from themselves. With no dividend or interest or deposit accounts it a no brainer for many CU members to remove the money from the account and pay it back to themselves.

CU reason d'etre was to lend cheaper than banks. They left there costs go out of control I see a local CU with many buildings only open 2-3 times a week for 2-4 hours. Many if these buildings cost a quarter of a million and ran down CU reserves. They are now caught in a Hobson's choice in that they are too expensive to draw mass borrowings from there BnB business but need too big a margin to solve there costs.

CIP4 · 01-01-2021 3:24pm

I see some credit unions are starting to get into giving out mortgages. This may work for them if they have more relaxed rules than banks and attract people that way although I suppose they will still have too follow ECB rules. Again interest rates are an issue in the fact their mortgages will be higher rates than banks.

[Deleted User] · 01-01-2021 3:28pm

CIP4 wrote: »

I see some credit unions are starting to get into giving out mortgages. This may work for them if they have more relaxed rules than banks and attract people that way although I suppose they will still have too follow ECB rules. Again interest rates are an issue in the fact their mortgages will be higher rates than banks.

Which means by default they will only attract sub prime applicants. That doesn't bode well.

Just checked there and an 80% mortgage was 4.59% or approx double the cheapest prime mortgage. That model is broken.

Bass Reeves · 01-01-2021 3:33pm

CIP4 wrote: »

I see some credit unions are starting to get into giving out mortgages. This may work for them if they have more relaxed rules than banks and attract people that way although I suppose they will still have too follow ECB rules. Again interest rates are an issue in the fact their mortgages will be higher rates than banks.

Why should there interest rates be higher than Banks

stayback · 01-01-2021 4:05pm

Credit unions serve their purpose in every economy small short term borrowings. The big issue for credit unions it cannot be run be volunteers anymore as under central bank rules people must now be qualified to work in any financial institution.
Credit unions typically have large buildings and a large workforce.
Rightly or wrongly banks have moved online in what is a cost saving measure. I feel credit unions will have to move more into the online world to compete. People want convenience along with price. Example I got a €5k from my bank at 8pm on a Saturday night. No meeting anyone no payslips (salary paid into bank ). If that was the credit Union I’d have to make an appointment etc.

I do agree credit unions have a place but they need to modernise and stay relevant.

No dividends from Credit Unions in 2020.

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