The summer of 2023 saw a new record as Americans surpassed an astonishing $1 trillion in credit card debt, according to the Federal Reserve Bank of New York. The coupling of both high interest rates and inflation are taking a toll on households across the country and across all income levels. In today's financial landscape, the increase in credit card debt has emerged as a significant concern for individuals and families who are facing increased financial hardships. 401K accounts are also seeing hits as hardship withdrawals have increased by 36% since Q2 2022, according to a Bank of America analysis.
As a credit union, you distinguish yourself as a community-focused institution that aims to benefit its members. Since your institution prioritizes the financial wellbeing of its members over profit maximization, your mission and services make your credit union well-positioned to help guide its members through turbulent times. Here are some ways you can significantly contribute to helping your members confront the rise of credit card debt.
Financial Education
As a credit union, you are infamously known for being committed to enhancing the financial literacy of your members. With comprehensive financial education programs, workshops, and resources, you’re able to equip individuals with the knowledge and skills needed to make informed decisions regarding credit card usage and debt management. This opportunity to become a trusted partner and advisor for your members is priceless.
Also offering personalized financial counseling services helps your members devise effective debt repayment plans. These counseling sessions offer guidance on budgeting, saving, and implementing strategies to reduce debt.
Low-Interest Credit Cards
Many credit unions provide low-interest credit card options to their members — one of the perks of being not-for-profit. Reaching out to those who would be best suited for this option not only benefits your members, but you as well. These cards typically feature competitive interest rates, minimal fees, and transparent terms, making them a more affordable alternative to mainstream credit cards.
Debt Consolidation Loans
Credit unions offer debt consolidation loans that enable members to merge their high-interest credit card balances into a single, lower-interest loan. This simplifies the debt repayment process while reducing the overall interest expenses. Consider utilizing tools that can streamline this process to help more of your members faster and more efficiently.
Member-Centric Structure
Since your institution operates as a member-owned and member-operated entity, you are ensuring that decisions are made with the best interests of members in mind. This cooperative structure fosters trust and accountability that can sometimes be lacking in traditional banking institutions. In times of economic adversity, you exhibit flexibility and willingness to collaborate with members facing financial challenges. Your ability to work with your members and offer various options can help to provide temporary relief from the overwhelming and sinking feeling of their debts.
The escalating issue of credit card debt demands attention with this freshly reached $1 trillion record. Nevertheless, you are there, to stand as a reliable partner and offer essential assistance to your members. By promoting financial education along with your robust list of member-centric services, your credit union will keep empowering its members to regain control of their finances.