Are you a credit union executive looking for an efficient and effective way to support your charitable giving strategies? A Charitable Donation Account (CDA) is an investment account that grants credit unions special investment capabilities while supporting their donations to foundations and charities. This investment vehicle is quickly growing in popularity as more credit unions adopt it as part of their broader strategy. In this blog post, we will explain the benefits of CDAs and their widespread impact to both credit unions and communities nationwide.

How does a Charitable Donation Account (CDA) work? 

In 2013, the National Credit Union Administration (NCUA) approved federal credit unions to fund Charitable Donation Accounts (CDAs), a hybrid charitable and investment vehicle. A Charitable Donation Account (CDA) is a sustainable funding strategy that allows credit unions to support communities through investment returns, rather than operating income. Credit unions can use their investment earnings to support a wide range of charitable initiatives, including but not limited to local food banks, education programs, healthcare initiatives, arts and culture, and disaster relief efforts. By reducing or eliminating the cost associated with charitable giving, CDAs provide a solution to credit unions interested in maximizing their charitable contributions while continuing to provide exceptional member service.

Under the final NCUA rule, credit unions are required to donate at least 51% of the investment earnings to one or more qualifying 501(c)(3) charities. This ensures that the primary focus of the CDA is charitable giving. However, credit unions can direct the remaining 49% of investment earnings towards additional member benefits, such as expanded service offerings, lowered fees, or investments in digitalization and technology.

Why should credit unions use Charitable Donation Accounts (CDAs)?

Investing in CDA accounts is a smart financial move for credit unions looking to grow their charitable giving programs. Diversifying investment income through CDAs can provide credit unions with greater financial stability and ensure they are prepared for future economic challenges. By investing in CDA accounts, credit unions can set aside funds specifically for charitable giving and can easily access them when they are ready to make a donation. Moreover, for credit unions that operate primarily on operating income, the additional revenue generated from 49% of the CDA returns can be especially impactful. With the potential to grow and generate greater returns over time, CDA are an important tool for credit unions to consider when strategizing on how to make their charitable goals a reality.

As credit unions contend with increased competition from other financial institutions, they look toward CDAs as a viable solution for sustainable giving. Through CDAs, credit unions can support a variety of causes that align with their organizational mission and values. With money from CDA investment returns, credit unions can fund initiatives that improve access to financial services and products, such as free tax filing assistance or microloan programs. CDAs can also be used to fund financial literacy courses that equip people with the necessary knowledge and skills to better manage their finances. These workshops can cover subjects such as budgeting, saving, investing, and debt management, with the ultimate aim of empowering individuals to achieve their financial goals and improve their overall quality of life.

CDAs can also help credit unions invest in community development initiatives that address the root causes of economic disparity. Through these investments, credit unions can support youth programs, affordable housing projects, and infrastructure development. When communities receive increased resources and support, they gain a path toward financial well-being. In addition to supporting local efforts, CDAs enable credit unions to contribute to global causes that align with their values and the priorities of their members. For instance, CDAs can fund international relief efforts in times of crisis or support long-term development projects in larger communities.  By supporting socioeconomic development, fostering financial education, facilitating financial inclusion, and providing access to social and community services, CDAs enable credit unions and their members to make a difference in the lives of people on both local and global scales. Through the power of service, CDAs play a pivotal role in shaping a more equitable and financially secure society.

As a result, CDAs play a large role in increasing the brand awareness of credit unions. By utilizing CDAs to fund their giving initiatives, credit unions can create a unique and impactful way to connect with potential members, particularly younger individuals who place high importance on social responsibility. Studies have shown that consumers are increasingly drawn to companies that prioritize social responsibility. According to a 2020 survey by the National Retail Federation, 71% of consumers are now more likely to buy from a company that implements socially responsible initiatives. Younger generations in particular, such as Millennials and Gen Z, are widely recognized for their commitment to environmental and social causes. This trend underscores the importance of corporate social responsibility in building and maintaining a strong brand reputation. By investing in charitable initiatives through CDAs, credit unions can appeal to these demographics and attract new members who share the same values. Moreover, the use of CDAs also offers credit unions the added benefit of generating positive PR and media attention. With the advent of social media and the internet, the reach of these efforts can extend far beyond traditional media channels, creating broad-based visibility and credibility with a wider audience. This exposure can help foster a sense of trust and community engagement, ultimately motivating potential members to choose the credit union over other financial institutions.

By using charitable donation accounts to fund their giving initiatives, credit unions can make a meaningful impact on those in need while also enhancing their reputation as a socially responsible organization. In summary, investing in CDA accounts is a win-win for credit unions, their members, and the charities they support.

Establish a Charitable Donation Account (CDA) with Members Trust Company

In 2013, Members Trust Company (MTC) used its expertise in responsible investments to pioneer the Charitable Donation Account (CDA) and inspire the NCUA’s final rule. Since then, MTC has grown to manage over $4 billion in assets, including $330 million in CDAs for credit unions across the country. In fact, MTC has helped credit unions earn four times more on their CDA investments than their standard capital investments.*

As the first national trust company owned by and for credit unions, MTC is committed to helping credit unions serve their communities. To learn more about how CDAs can make a positive impact to your credit union, fill out the form below.

*Return comparisons are between a composite of MTC Credit Union CDA returns and the average return on average assets as reported by the NCUA from 2013 to 2022.

Non-deposit investment products available through Members Trust Company are not deposits of or guaranteed by the trust company, a credit union or credit union affiliate, are not insured or guaranteed by the NCUA, FDIC or any other governmental agency and are subject to investment risks including possible loss of the principal amount invested. Members Trust Company, owned and managed by America’s credit unions, is a special purpose federal thrift regulated by the Office of the Comptroller of the Currency. Past performance is not indicative of future results. This is for informational purposes only and is not intended to provide legal or tax advice regarding your situation. For legal or tax advice, please consult your attorney and/or accountant. Any opinions expressed are those of the presenter and do not necessarily reflect the position of Members Trust Company. The information above is obtained or compiled from sources we believe to be reliable. We Do Not Guarantee that such information, will be free from errors, omissions, whether human or mechanical, nor do we guarantee their timeliness, accuracy, or completeness.

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Jason Ritzenthaler, CFA, CTFA
Chief Investment Officer
Director, Institutional Investments
Direct: 813-386-8705