It's no secret that interest rates have been changing a lot recently. During the pandemic, we experienced record-low interest rates. Over the last year though, rates have skyrocketed. The Federal Reserve even recently said that more interest rate hikes will likely be needed in the future.
Interest rates have completely altered the financial landscape, but is your marketing strategy still living in the past?
Since your credit union and its members are both affected by changing interest rates, you need to understand the effects and how to effectively market to benefit both your credit union and its members.
The Impact of Interest Rates on Credit Unions
Interest rates tend to have a mixture of short and long-term effects on credit unions, some of which reach the very core of the organization itself.
Changes in Product Demand. Demand for certain types of products changes. When interest rates are high and are only expected to increase, products with variable rates become less attractive. Financial services with fixed rates become more popular with members, especially if there is fear that rates won't be decreasing anytime soon.
Savings Surge. Members start saving more money. One of the things that high-interest rates have historically done is encourage people to save as much money as possible. This means that while they may not be spending as much on household items or borrowing in general, they are likely putting more into their checking and savings accounts with each paycheck.
Competitive Advantage. It's an opportunity to become even more competitive in the marketplace. As interest rates rise, credit unions have an opportunity to adjust their own rates in response in a way that helps to make their products more attractive than those of bigger banks.
The Impact of Interest Rates on Members
High-interest rates impact members both directly and indirectly, including in ways like the following:
Monthly Payments Start to Increase. Remember that the interest rates on credit cards in particular aren't fixed—they fluctuate over the life of a loan. So as rates rise, so do minimum monthly payments. This means that members have less money in their pockets than normal.
It gets harder to borrow money. Not only will a member likely not get approved for the amount of money they want to borrow, but in some cases, they might not get approved for a loan at all as rates continue to go up.
Increased financial stress all around. Will minimum payments continue to rise to the point where they become unmanageable? Even if a prospective homebuyer gets pre-approved for a mortgage, is it only going to illustrate to them that owning a home is unrealistic? How soon will they start to also worry about job security? As interest rates rise, the amount of stress your average credit member experiences will rise right along with it.
How to Market During Fluctuating Rates
With varying levels of borrowing, financial stress, and product demand, learn how to adapt flexible marketing strategies:
Always Make Interest Rates Work for Your Members. When interest rates are high, advertise your CD offers to your members. This will help them feel better about the current state of interest rates. When interest rates are low, market different types of loans. Angling your approach will help members feel in control of their finances by helping them capitalize on the current rates.
Enthusiastically Promote Relevant Products. Although fluctuating interest rates can cause financial uncertainty, there are always relevant products to help your members. Promote products such as early pay and FICO when interest rates are at their peak. When rates are low, market HELOCs, auto loans, and insurance. No matter the rates, there is always something your members could use.
Best Way to Help Your Members? Unlock the Potential of Your Services
At FLEX, we understand that you want to create the best possible experience for your credit union members, though certain elements like interest rates are beyond your control. There are many things that you can control, however, and we've recently authored our Member Services eGuide to help you take full advantage of every last one of them. To find out more information, click the button below to download your copy and get started.
