To Credit Union or Not to Credit Union? That is the Question
Today is officially bank transfer day–The day when folk who feel that big banks have gotten too big and too unresponsive move their money to small local banks (less than $1 billion in assets) and credit unions. This has gotten associated with the Occupy Wall Street protests but it began as a separate movement. Do I want to get involved?
First, not to seem too naive, but could moving my money be more than a symbolic gesture? Could it really help make the world a better place?
Second, could I really save money?
Third, what about convenience? Is banking with a credit union or small bank going to make my life harder?
Fourth, how safe is this? Am I going to lose my money?
Fifth, are there really people out there doing this?
Let’s take these points in order.
1. That naive thing. I want to do good by the world but will this really make a difference or is it like a bumper sticker sentiment—it tells what I value but doesn’t really do anything? Will this really show those big corporate banks that they need to change their ways? ….Well, yes and no. The public outcry over Bank of America’s planned $5 fee caused the financial giant to reconsider. But the amount of money the big banks will see slip through their fingers is minimal by their standards. Nonetheless, banks don’t like to lose customers. A big enough exodus will get their attention. More importantly though, the money that credit unions gather gets plowed back into the local community. Think George Bailey’s small credit and loan versus the dreaded Potterville bank. According to the FDIC (here and here) small banks lend more to small businesses. The Move Your Money project says,
Smaller banks do disproportionately more small business lending than the big banks. Small businesses, in turn, are the main engine of job growth, accounting for 65% of new jobs. Banking locally is a great way to support independent businesses and create more jobs in your home town.
2. Saving money. Will changing to a credit union save money? …..Compare but probably yes. The Motley Fool says,
Credit unions are run not-for-profit, and thus are able to deliver substantially higher rates than banks for the same deposits. According to Bank Rate Monitor, the average yield on a money market account is about 1.5% higher at a credit union than the national bank average.
According to a 2009 year study by the Filene Research Institute, the average credit union account holder paid $71.47 in annual fees, compared to $183.14 paid by the typical bank customer.
3. Convenience? I don’t want to be inconvenienced. I don’t want to be searching everywhere for an ATM I can use. Credit Unions are usually only a few branches. How am I going to access my money?…Actually, most credit unions belong to co-op of credit unions that “pool” their atms. The single branch of The Community Credit Union of Southern Humboldt (yes, its acronym is really CCUSH—I’m 90% sure that was an accidental reference to our local product), because of the Co-op Network that it belongs to, actually has more fee-free atms available than Bank of America does.
4. Well what about safety? Is my money going to be insured? …Always ask because some aren’t but 97% are insured to the same standard as most banks are. Be aware that credit unions do fail at a slightly higher rate than banks do.
5. So have other people started transferring money out of big banks and into credit unions?…Oh, yes. The big banks aren’t talking about the amount of customers they’re losing but the credit unions are happily trumpeting some numbers. Mother Jones says,
Credit unions across the country have added upwards of 650,000 new customers since September 29 (the day Bank of America unveiled its now-defunct $5 monthly fee for debit cards), according to a survey of 5,000 credit unions by the Credit Union National Association. The group also estimates that credit unions have added $4.5 billion in new savings since then…
Okay, want to join a credit union? Just go to this Credit Union Locator (this appears to be overtaxed today 11/5) armed with the zip codes of the towns near you. Plug in your zip code. Google the names of the resulting list to see for which ones you are eligible to become a member.
So, I made a list of questions you might want to ask. Remember, not all the answers are going to be yes. You just want to know how your bank compares against the credit union. And how their services stack against your needs.
- Are they insured by NCUA?
- Do they charge for a checking account?
- Do they do automatic deposit?
- Is there a charge for a debit card?
- Do you need to deposit money to open an account? (Usually you need to pay a small sum like $25 to become a member.)
- Do they have online banking?
- Are they a member of Co Op Network?
- Ask what is their policy for non network atms. Some actually waive fees that the other banks charge at their atms.
- Do they have an after hours help line?
- Do they have fee free overdraft protection?
- Do they have a free text message warning when you are close to overdrawing?
- Do they have free smart phone banking (can you deposit a check by photographing it and sending the picture to them?)
Also check and see how the institution is rated here. Four and five star institutions are fine. Anything else is a bit shaky.
Need inspiration? Read this man’s account of his change to a credit union.
Want a step by step break down of what you need to do to make the transfer go smoothly? Go here. (Though one caveat to the suggestions here is that I would open the credit union account and start paying bills before I close my original bank account.) Take your time. In spite of the artificial deadline, you don’t have to rush to move your money. A week or two one way or the other doesn’t matter much.
Also, remember that the hard-working folk at your current bank are not to blame for your disapproval of the corporation they work for. Treat them kindly throughout the process.