As Americans search for ways to recover from the economic fallout from the COVID-19 pandemic, a familiar savings tool has been sharpened into an efficient weapon in the fight to decrease debt.
According to a November 2020 report by The Motley Fool, the average American household has $140,000 in debt, ranging from personal loans to credit cards and more. Moreover, a survey conducted by the same outlet earlier in the year revealed that over 60% of American adults were “somewhat” or “very” worried about their household finances due to COVID-19.
At FAIRWINDS Credit Union, we empower our members to achieve financial freedom by saving more, eliminating debt, building wealth, and living generously. “Change It Up” is among the products and services that promote healthy spending and saving habits.
Our credit union has recently added a unique option to our existing “Change It Up” savings round-up program that enables our members to turn everyday debit card purchases into debt-reduction instruments. The idea – which is a product of our FAIRWINDS Member Experience Team – is an extension of our company’s financial freedom strategy. Launched in November 2020, this new enhancement allows our members to use their round-up change to pay down their debt.
The new “Change It Up” option is unique in that it allows members to transfer rounded-up funds to pay down the principal on a consumer loan as an alternative to moving the funds into a savings account. Members can enroll for free and automatically have their debit card purchases rounded up to the nearest dollar with the cash difference transferred directly from their spending or checking account to either a FAIRWINDS consumer loan account as a principal payment, or to a FAIRWINDS savings account. Members also have the option to save more or eliminate debt faster by rounding up an additional $1 to $5 with every debit card purchase.
The initiative immediately resulted in a sharp increase in member enrollments. We experienced an 18% increase in enrollments in “Change It Up” in the first 60 days since introducing the new feature. Adding the option to increase round-ups with each purchase truly accelerates a snowball effect that eliminates the debt even faster.
Member savings totaled $4.6 million during the first four years of the “Change It Up” program. In less than five months of debuting the new debt-reduction option, members have automatically rounded up a total of $1.3 million toward their savings or consumer loan accounts. Right now, eight percent of our membership is enrolled in the program with almost 14% of new members electing this option.
FAIRWINDS is the rare financial institution that doesn’t want its members to have debt. We recommend that everyone first build $1,000 in emergency savings, and then start reducing their debt as quickly as possible. We added this innovative new feature of automating a loan pay down to help our members accelerate that debt-free goal. I’m unaware of any financial institution encouraging people to pay off their debt faster and providing them with the tools to do so.
A growing number of success stories are accompanying the “Change It Up” initiative. One of them is Theresa in Altamonte Springs, Florida. “Even though I spent half of 2020 unemployed, thanks to the ‘Change It Up’ program, I was able to put aside a substantial amount toward my savings for emergencies.”
The future may be uncertain, but the focus on aiding our members’ financial well-being remains constant. Stories like Theresa’s encourage us to keep evolving our “Change it Up” program to meet the needs of our members. This is one small piece of a larger architecture for guiding them on the path to financial freedom.
Jim Adamczyk is Senior Executive Vice President and Chief Lending Officer of FAIRWINDS Credit Union. Founded in 1949, FAIRWINDS serves members across the nation from its Orlando, Florida headquarters. FAIRWINDS Credit Union is consistently ranked as one of the best financial institutions and employers in its region. Visit FAIRWINDS.org for more information.