Credit Union Balances Rise, Led by Consumers on Both Ends of the Credit Risk Spectrum

The newly released Q3 2024 Credit Union Market Perspectives Report from TransUnion (NYSE: TRU) found that balances continue to rise across all credit products, led by share growth among consumers in the super prime and subprime risk tiers.

Among credit unions, balances grew among all consumer lending areas in Q2 2024. Growth ranged from 2.7% in credit union auto balances up to 14.4% for home equity loan balances as borrowers continue tapping into the equity in their home to make home improvements, consolidate other debt, or pay for other large purchases like education expenses. Bankcards also saw significant YoY balance growth, up 8.6% over the period.

“Despite a consumer credit market in which originations for many products remain below levels we saw two years ago, credit unions continue to see their total balances increase as they continue to serve the needs of their members,” said Jason Laky, executive vice president and head of financial services at TransUnion. “It will be interesting to watch new loan growth as credit union deposits return to growth and interest rates likely begin falling later this year.”

Taking a deeper look at credit balances, growth has not been equal among all credit risk tiers. In fact, credit unions are now seeing a greater share of their overall balances being found among consumers in the super prime and subprime risk tiers, while other risk tiers saw their shares decline YoY. Each of these other risk tiers has seen their balance share decline for two consecutive years.

Among subprime, Q2 2024 represented the fourth consecutive YoY growth in balance share. On the origination front, Q2 2024 (the latest quarter available for origination data) saw increases in two key lending areas with personal loans up 7.0% YoY and mortgage finally seeing a slight uptick (+1.8% YoY) after following a long period in which higher interest rates have kept people waiting to buy. With the Federal Reserve’s recent signaling that the time has come to cut interest rates, other lending products may similarly see the beginning of an upward trend in loans among credit union customers.

“With the Fed all but confirming that their next meeting will finally be the time for rate cuts, it would not be surprising to see much of that pent-up demand for mortgages and auto loans begin to finally be realized as more people who have been on the sidelines finally engage,” said Sean Flynn, senior director of community financial institutions at TransUnion.

Delinquencies remain lower among credit union members as compared to other financial institutions
Delinquencies across most credit union lending products are no longer seeing the elevated growth rates of 2021 and 2022, leveling off for some products and even declining YoY for unsecured personal loans and HELoans. Additionally, credit unions continue to see delinquency rates lower than other lenders. Credit unions saw 0.8% account-level 60+DPD delinquency in Q2 2024. In comparison, FinTech/specialty lenders saw 3.0% 60+ DPD in Q2 2024 while other banks ranged from 0.9% to 1.6%.

Flynn concluded, "It's exciting watching the growth and innovation taking place in credit unions. As we look to 2025, it's becoming increasingly clear that to remain relevant and continue attracting today's consumers, credit unions need to have data-driven, modernized marketing strategies in place. Whether that's more optimized marketing spend in digital advertising or advanced acquisition tools that drive more targeted campaigns, credit unions will need to leverage data and technology to meet consumers where they are, with offers that mean something to them."

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