All You Need to Know About Bonus Dividends and Loan Rebates

It’s Bonus Time! Those are three words we all love to hear. And that’s why one of the best parts about being a credit union member is the many extra benefits and bonuses we get. Take, for instance, bonus dividends and loan rebates. Let’s take a look at how they work.

How do these benefits work?

As member-owned cooperatives, credit unions generate revenue through various means. In many credit unions, after covering operating expenses, some or all of the surplus is returned to members. This is done through lower interest rates on loans, low or waived account fees and all the other advantages you’ve come to enjoy as a member of Forest Area Federal Credit Union.

Some credit unions take it one step further by actually putting money back in their members’ pockets through bonus dividends and loan rebates, each of which are paid off at specific times of year.

What are bonus dividends?

Investment accounts typically earn regular dividends throughout their term. Bonus dividends are extra payments beyond these expected dividends, which are divided among eligible members upon approval from the CU board.

Typically, a credit union will review its performance at the end of the year, and/or the end of a business quarter, then determine if a bonus dividend can be issued to members. If approved, the dividends are distributed based on a member’s financial activity with the credit union over the past period. The dividend amount will be calculated as a rate of the member’s shares. Generally, members who’ve interacted more with the credit union get a higher bonus dividend rate.

Bonus dividends may be paid out in cash or credited to the member’s savings or share account.

[At Forest Area Federal Credit Union, we are proud to offer our members bonus dividends at [year’s end/quarter’s end], pending board approval.]

What are loan rebates?

Loan rebates are another way credit unions give back excess revenue to members. Credit unions pay back a percentage of the interest the borrower paid over a specific period. In general, the more interest the member paid on the loan, and the more interactions they’ve had with the credit union, the higher the potential rebate. In addition, the loan type and term will be factors in determining the rebate rate.

Similar to bonus dividend payouts, credit unions may offer these rebates through cash payments or direct deposit to the member’s checking account.

If you believe you may be eligible for a loan rebate, make sure you are up-to-date on your loan payments. A late payment may disqualify you from the rebate.

Bonus dividends and loan rebates are two money-saving features unique to credit unions. Use this guide to learn how these advantages can put money back in your pocket.