Big Banks vs. Credit Unions

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Originally posted on BreakThru Radio (BTR Today) on 1/22/11.

Occupy Wall Street has brought many issues to the foreground of American concern over the past few months, principle among them being problems with our banking system. One critique of the OWS movement is that their solutions are “too radical” for mass adoption and not based in our common capital-based systems already in places, but the movement’s protests against banks has been one of the most successful OWS campaigns yet.

In November of 2010, Bank of America, who earned $756 million in 2010, had a plan for 2012 that involved a monthly $5 debit card usage fee. People were outraged, and even softening the plan did not help Bank of America. The people revolted, and not just Bank of America customers, but many thousands of national bank customers who were not going to stand for this additional charge. They organized a Bank Transfer Day for Nov. 5, 2011, and though the movement has no direct association with OWS, it resonated well with the protestors and was certainly categorized by the media as part of the “99%” backlash happening across America.

The day before Bank Transfer Day, more than 650,000 people had already opened accounts at Credit Unions and began the transfer process, and on the actual date, the amount of transfer activity at banks was so unheard of, some banks actually stopped letting people do it. The fee had been dropped, but that wasn’t even the point any more. It had grown to be much more than that.

The people wanted to see the returns on the profits from their money. They wanted to be in control of their finances, including loans, and they wanted to be in charge of the rules and policies of their financial center. For them, national banks seem to no longer be an option and people in droves have turned to credit unions. The differences between credit unions and banks are not many, but they’re important and make the world of difference when managing money.

First of all, credit unions are not-for-profit; they are “member owned financial cooperatives,” as the credit union organization Young and Free puts it simply. They offer the same services as a bank, like savings, credit, checking accounts, loans, etc. Each customer of the credit union is known as a part owner-member simply by holding an account at the establishment, since the credit union itself makes no profit,. By pooling all their money to finance loans and the profit made is returned to the members equally, credit unions are designed on a more cooperative model by comparison to banks. The members also make up the Board of Directors for the credit union and are voted on by their peers. This democratic organization allows the credit union to offer higher interest rates and lower fees than corporate banks can, and credit unions are often cited as a good way to save money.

Then there’s the big difference: Credit unions are small and very personal. Amy Shields, who banks with her employer’s CU, noted that the members are usually associated in some other way, via place of work, worship, community, etc, so the service is very personal. It would not be uncommon for the teller to know the names of its members and their banking history so they can better serve them. While they can’t always offer a 24-hour machine that might be able to help a person in need, they have a welcoming and knowledgeable staff who are neighbors rather than just bankers.

But while their small size might allow for all these benefits, it does mean there are not many physical establishments, if more than one at all. Jay Boylan, an Atlanta based Credit Union member who has been very pleased with his switch from Wachovia, said withdrawing money from ATMs can become a problem if other banks charge ridiculous fees, even though the credit union won’t. (For the most part, credit unions charge a very small monthly fee for debit card use rather than an ATM fee every time, in the best interest of their members.) He said accessing money outside of the area of the credit union could be a difficult task, but suggested using a nationally recognized CU such as Navy CU or Delta CU for more location options. Credit unions are also known to have a lesser quality online banking service than a corporate bank, and are a little more difficult to become a member of but the drawbacks are minimal compared to the benefits.

BreakThru Radio spoke with Bank of America regarding the switch from the national bank to a local credit union and while it took going through a machine first, the representative who finally answered didn’t have too much to say about credit unions themselves. She did note that Bank of America is taking their customer service very seriously as of late, having installed a grading system and monthly customer service reviews. They heard the cries of their distressed customers loud and clear, but it may be too little too late. There are going to have to be major changes to Bank of America and the banking system in general for them not to lose all their customers to credit unions. BTR also had a chance to hear from TD Bank, who is known for its personal and friendly customer service, but they were surprisingly much less helpful than Bank of America and couldn’t offer any advice or reason as to why one should not switch to a credit union.

When BTR contacted a credit union, the rumors were indeed true and the customer service was incredible. A smart woman answered the phone immediately, and spoke enthusiastically about her credit union, to which she was also a member, but was also frank about the downsides.  Location was the primary complaint she heard most, and while no one could do anything about this, she noted that the profit margin hasn’t been great in the last few years because of the economy. Still, Mr. Boylan made mention of his monthly payouts from his CU, minimal as they may be. He also spoke highly of the loan options, better rates on accounts, and better overall satisfaction with his banking needs.

Switching to credit unions has been a hot button issue for the past several months, but only time will tell what an impact this kind of shift will bring about. Accounts at corporate banks almost seem outdated, the way they are regulated and the distribution of profits is no longer relevant and acceptable. The masses are taking a stand, and if a credit union sounds like a good alternative to the corporate banks, it’s worth looking into the availability and eligibility of local unions.

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