In this period of economic turmoil and uncertainty, consumers are likely to reduce discretionary consumption and increase savings. Now is a perfect time for credit unions to introduce options that promote and encourage savings routines. At the same time, the subprime mortgage market and continuing credit crisis has caused many banks to tighten their lending standards, creating an opportunity for credit unions to serve borrowers whom other lenders are turning away.
Auto Savings makes saving easy and attractive by bundling consumption with thrift. It’s really quite simple: members who take out auto loans are asked to commit to automatic monthly savings for the term of the loan. These funds are restricted with the exception that they can be withdrawn to pay for auto repairs.In a consumption-driven society where we are constantly barraged with advertising that urges us to “Buy! Buy! Buy!” exercising savings discipline is difficult and promoting savings can feel hopeless. But what if saving money was as easy and attractive as… well, spending money?
There are three key features behind Auto Savings:
- Automatic. Once the borrower commits, the savings deposits are automatic.
- Bundled. The product links a difficult and often unpleasant activity (saving) to something easier and more fun (car buying).
- Committed. The funds are locked up for a period of time, and the member faces penalties for early withdrawal.
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Corporate Social Responsibility I Social Innovation I Emerging Technologies
Bank of America