By Mike Hales, founder, CUinfluential
Your credit union is deeply invested in the communities you serve. Providing highly competitive and accessible financial services is your core business. But it doesn’t stop there. Strategic charitable giving is a powerful tool that separates credit unions from other financial institutions. Charitable giving can take the form of specific contributions, promotion of financial literacy, community engagement by supporting local community projects and initiatives and educational scholarships. These are a few of the tools credit unions use to strengthen their position as foundations of financial stability. Strategic charitable giving:
- Differentiates your credit union from other financial institutions,
- Builds trust and loyalty with socially conscious members,
- Strengthens brand reputation and community goodwill, and
- Drives membership growth by appealing to younger generations.
Of course, these and similar initiatives cost money, and for many credit unions that find themselves in the difficult position between serving community needs and maintaining capital adequacy, charity, as they say, begins at home.
However, there is an NCUA-approved source of money for charitable giving purposes that doesn’t jeopardize capital adequacy. In fact, it doesn’t require credit unions to divert capital from core operations.
This often-overlooked solution is a Charitable Donation Account (CDA). The NCUA allows credit unions to invest in CDAs as a means of generating income for charitable donations. Under NCUA Part 721.3(b), credit unions can allocate up to 5% of their net worth into CDAs. This 5% cap is crucial, as it limits the total amount that a credit union can invest in higher-risk assets under the CDA structure.
A Charitable Donation Account (CDA) allows your Credit Union to invest in a variety of expanded investment options that traditionally would be deemed impermissible by the NCUA. By investing funds in higher-yield assets, credit unions can significantly increase their charitable contributions while maintaining financial stability. A minimum of 51% of the investment returns must be donated to qualified charities, making CDAs a sustainable and mission-driven approach to community support. The remaining 49% of the proceeds can be used to fund other initiatives at the credit union’s discretion.
By leveraging investment earnings rather than direct donations, credit unions can amplify their community impact without affecting core operations. Funds can be directed toward 501(c)(3) organizations, including local nonprofits, education programs, financial literacy initiatives, and community development projects.
Putting CDA proceeds to Work with a Charitable Impact Fund.
At a time of heightened consumer financial anxiety and community economic uncertainty, credit unions can take the lead by combining a Charitable Donation Account (CDA) with a Community Impact Fund (CIF). A CIF is an innovative financial tool that allows credit unions to directly support their members, employees, and communities by leveraging CDA investment returns for mission-driven lending. By using a portion of returns from a CDA, credit unions can offer 0% interest Impact Loans to help financially vulnerable individuals, particularly those classified as ALICE (Asset Limited, Income Constrained, but Employed), meet essential needs while building financial resilience. As an example, CIF funds are used to provide interest-free loans that help members cover critical expenses, such as housing, transportation, medical bills and basic necessities. These loans can specifically target a growing population of households that earn too much to qualify for government assistance but struggle to afford daily living expenses. As borrowers repay their interest-free loans, they are encouraged to start building emergency savings accounts, fostering long-term financial stability.
The key benefits for credit unions are numerous. This CIF/CDA mission-driven approach to community support:
- Addresses Local Financial Hardship – CIFs provide direct relief to ALICE households, supporting financial stability and strengthening the local economy;
- Builds Member and Employee Engagement – Offering Impact Loans fosters stronger relationships with members and employees, reinforcing the credit union’s role as a trusted financial partner;
- Enhances Wellness and Savings Growth – Borrowers transition from debt dependency to savings-building, improving their long-term financial security;
- Drives Regulatory and Mission Alignment – CIFs align with credit unions’ cooperative principles and NCUA-approved charitable and investment strategies, ensuring compliance while maximizing impact;
- Creates Sustainable Social Impact – Unlike one-time charitable donations, CIFs create an ongoing cycle of support, continuously reinvesting in the community.
Common-sense considerations include the following: Credit unions must ensure CIF funding aligns with financial sustainability and long-term growth needs. Also, proper loan administration and borrower education are essential for maximizing impact and repayment success.Furthermore, identifying the most pressing financial challenges for ALICE households ensures the fund is effectively targeted and impactful.
A Powerful Pairing. Combining a Charitable Donation Account with a Community Impact Fund enables credit unions to create a holistic and scalable model for community support. This dual approach enables credit unions to increase charitable giving while directly addressing financial insecurity, all while reinforcing their core mission of “people helping people.” A CIF isn’t just an investment in financial returns, it’s an investment in people, communities and long-term economic stability.
Charitable giving is a timeless yet timely strategy. Why is this so important now? More than half of Americans (53%) say they’re living paycheck to paycheck, according to LendEDU’s 2025 Personal Finance Survey. That means over half the country is one unexpected expense away from falling behind. But it’s not just about the numbers. Living paycheck to paycheck also takes a toll mentally and emotionally.
When every dollar is already spoken for, it can feel impossible to plan ahead. There’s stress, shame, and burnout. Some people give up on budgeting because it feels like nothing ever changes. Others avoid checking their bank account entirely.[1]
Your members and potential members want financial stability. Community support is critical, and the opportunity for credit unions to take center stage is now. Through Charitable Donations and Impact Loans, your credit union can reinforce your reputation as the foundation of your community.
At a time when millions of consumers across America search for stability in the face of economic uncertainty, their credit union needs to be the community’s foundation of financial security.
Local charitable giving is powerful. It differentiates your credit union from other financial institutions. It builds trust and loyalty with socially conscious members. It strengthens your credit union’s reputation and community goodwill. It drives membership growth by appealing to younger generations. It makes a difference. You can be the positive change for the communities you serve.
For more information about the advantages of NCUA Part 721.3(b), creating or reinforcing an income-producing Charitable Donation Account and/or developing a CDA/Charitable Impact Loan strategy, contact the author at mike@cuinfluential.com or (949) 291-6363.