Why membership is worth the cost

January 10, 2013 · By Kelvin Smith

Happy New Year, fellow members, and may 2013 be a good year for all of Us.

In going through my inbox after the holidays, I am finding a recurring theme in most of the comments on my recent blog posts. In a nutshell, most of the readers who sent comments (thanks, by the way, for participating) are in question about our new practice of collecting monthly membership dues from all members of the cooperative. And while the specific concerns vary from person to person, the gist of most seems to be “Why should I pay the credit union to hold on to my money?” Let’s talk about that.

In my last two posts I went over the Seven Cooperative Principles that should serve as the basic foundation of all cooperatives. The first principle, Voluntary and Open Membership, establishes that services are available to those willing to accept the responsibilities of membership. The third, Members’ Economic Participation, holds in part that members should contribute equally to the capital of the cooperative.

So, with membership comes responsibility, including the responsibility to contribute an equal share to capital. That is what the whole concept of dues is all about. Until now the capital of Arizona Federal has come exclusively from the proceeds of the business operation – what was left over of the interest and fees paid by members (or collected from merchants) after expenses were paid. While that has worked for the most part, it puts the entire burden for the funding of the operation onto those who utilize certain services while allowing those who choose not to participate fully to benefit without making a contribution. This causes unfair pricing for those who utilize our services, especially when capital is threatened by extraordinary events. Such was the case in recent years when the recession put pressure on the National Credit Union Share Insurance Fund, and we as a federally-insured credit union had to pay millions of dollars to our regulator to restore this vital fund. We increased loan rates and fees for services, and reduced dividend rates, in an effort to restore capital to acceptable levels.

Some may think this is fair, that capital should be provided by those using the services. But in a credit union, as in any cooperative, all members have equal access to the services, and making that access available comes at a cost. We believe that those who use the various services should cover the cost of those services, but if one member chooses to only use the credit union in ways that neither carry a direct cost or generate revenue indirectly – such as depositing paychecks and drawing most of the funds out using checks, over-the-counter transactions or online bill payment – that member is receiving a benefit from membership without contributing to the cooperative.

Assessing dues changes all of this, as each of Us will now be paying an equal amount each month toward the credit union’s capital. This dues payment makes each of Us eligible to use the credit union’s products and services as we choose (certain criteria such as credit qualifications still apply), and those services will continue to be priced fairly and competitively. I am sure you agree that all of Us as members should contribute equally to the capital of Arizona Federal. It will make our cooperative much stronger as we go forward.

Oh, one last thing: remember I said that contributing to capital was just part of the Members’ Economic Participation principle? Well, the other part says members should “benefit in proportion to the business they conduct.” On December 31 Arizona Federal paid out $3 million in PLUs payments (Paybacks for Loyalty to Us) to members who contributed the most by way of their participation to the capital surplus of the cooperative. More than 77,000 members received an average of approximately $38 each as their share of the credit union’s excess income – income that should continue to grow if more of Us begin participating in all that the credit union has to offer. I am sure that you do not know of any other Arizona-based financial services   provider that distributed its income to members in 2012, but for Us, it was simply the renewal of a longstanding practice.

So, here’s my answer to the question posed at the top: you shouldn’t pay anyone to “hold on” to your money. If that’s all you want out of membership, and you don’t find value in all the rest we have to offer, then being a member might not be right for you. But if you’re willing to give us the chance to earn your business for debit and credit cards, loans, investments, insurance and the rest, I guarantee that you will find that membership is absolutely worth the cost. Meanwhile, please continue to send me your comments and tell me what you think – and thanks for being one of Us!


Tags: Cooperatively Speaking