The nation’s banks are still feeling the public backlash from the financial meltdown and government bailout. Sizeable numbers of people are showing their anger by moving their money to credit unions.
According to the Credit Union National Association (CUNA), more than 1.2 million Americans joined a credit union in 2009.
“Memberships increased more than one-and-a-half times faster than the growth in the U.S. population,” says CUNA’s CEO Dan Mica, who points out that nearly one in four Americans now belongs to a credit union.
The numbers aren’t large enough to threaten the country’s big banks, but the growth is significant. Add up all the deposits and credit unions now have nearly 10 percent of the household savings in this country. That’s their biggest share of the market ever.
“Twenty years of surveys show credit unions are really trusted and highly regarded; the most trusted sector in the financial services industry,” Mica says. “Credit unions have always invested rather conservatively, so they didn’t get caught up in all of the recent loan losses.”
Want free checking?
A new study by Bankrate.com shows free checking is alive and well at credit unions. The website recently surveyed the 50 largest credit unions in the country. It found 39 of them offered free checking — no monthly service fees, per check charges, per transaction charges or minimum balance requirement.
“They also have lower thresholds to avoid fees,” says Greg McBride, Bankrate’s senior financial analyst. “So even on the accounts that did have a monthly service fee, you could avoid that fee at a lower balance threshold than we typically see at most banks.”
The same goes for bounced checks. The Bankrate.com survey found the average charge for an NSF check is roughly $5 less at credit unions than banks or thrifts.
Members are owners
Credit Unions are not-for-profit organizations. There are no shareholders, only members.
“That means you are as important as the next depositor,” notes Noreen Perrotta, money editor at Consumer Reports. “In a mega bank, if you don’t have a large amount on deposit, you may get slammed with more fees and you may feel like you’re not that important to them.”
With no stockholders to please, credit unions typically offer higher rates on deposits and other savings products than banks. They also tend to have lower interest rates on loans.
“If your credit union offers credit cards, chances are it will be at a lower rate than what the big credit card issuers are charging,” Perrotta says. “And they tend not to have as many ‘gotcha’ fees as banks.”
CUNA says consumers saved a total of $7.3 billion in 2009 (or $81 per member) by doing business at credit unions rather than banks.
Julia Garnett of Tacoma, Wash., was not happy with the way she was treated at her big national bank. She felt it was moving away from customer satisfaction and becoming less personal.
“I no longer wanted my money to make profits for a big financial services firm that I felt was not dealing in good faith with the public,” she explains. “I preferred instead to put it in an institution where I felt more resources would come back to the community.”
Two weeks ago, Garnett joined BECU, Washington State’s largest credit union. She tells me she’s glad she did.
Confronting the meltdown
This year BECU launched an aggressive advertising campaign called, “Switch Now or Pay Later,” which confronted the financial meltdown head-on.
“We are moving our money; away from the status quo, away from Wall Street bailouts and bonuses. We are the friends and neighbors who’ve made the switch to BECU — the credit union that puts people ahead of profit. So how about you? It’s your money. And it's time to move it. Or lose it — one nickel, dime, or hidden fee at a time.”
“We’re certainly not trying to attack the competition,” insists BECU spokesman Todd Pietzsch. “We’re just riding on what our new members tell us and what they’re feeling.”
The “Switch Now or Pay Later” campaign has worked. BECU expects to see its membership (currently 650,000 members across Washington state) grow by about 8 percent this year, following a 7.5 percent increase in 2009.
But what about ATMs?
Because credit unions are based in a specific location, it’s easy to assume members give up easy access to their money. That’s not the case.
“Getting your money into and out of your credit union is not encumbered by the fact that it may be a small locally based institution,” says Bankrate’s McBride.
Many credit unions belong to ATM alliances with thousands of machines across the country. Members can use these machines without a fee. BECU belongs to a co-op network of 28,000 surcharge-free ATMs.
Some credit unions are also part of a shared branching network that lets members make transactions at a branch of another credit union in another part of the country.
The bottom line
Credit unions used to be sleepy little saving institutions with a limited customer base. Not anymore. These days they offer many of the same products and services you can get at a large bank.And in many places, membership is open to anyone who wants to join. You can find credit unions near you on the CUNA site.
The only way to know what’s right for you — a bank or credit union — is to shop around and compare services, fees and interest rates. See what’s best for your personal financial needs. You might find that you want accounts at both a credit union and a bank. That’s what I wound up doing.