Like many Kossacks, I moved my money to a local credit union.
This diary will list some of the differences between my credit union account and my old U.S Bank checking account. I will also talk about the potential impact of Bank Transfer Day.
My U.S. Bank checking account didn't earn any interest. I earn 2.05% interest on my new credit union share draft account. To get this rate, I have to (1) use automatic deposit or withdrawal - a simple utility bill will suffice (2) use my debit card at least ten times a month and (3) don't get paper statements.
I can do all those things. If I couldn't or preferred not to, I'd still have NO MONTHLY SERVICE CHARGE. I would simply earn a very low interest rate. There are no monthly service charges on a checking account - not even an inactive one.
I didn't have to pay a monthly service charge at U.S. Bank because I had automatic deposit. Otherwise, I would have owed $6.95 per month if I get electronic statements or $8.95 per month if I got paper statements. I also had a savings account. If I didn't maintain a $300 minimum balance, I would have owed a $4 a month service charge. At the credit union, there is no monthly service charge on my savings account ever.
In fact, all the area banks have high monthly service charges for some customers. At TCF Bank, I would owe a $9.95 monthly service charge unless I had 15 qualifying withdrawals or a minimum $10,000 combined balance. If you fall short one month, do you now owe $9.95? At the credit union, I don't have to keep track of how many times I use my debit card.
At Wells Fargo, I would owe a $5 monthly service charge unless I had automatic deposit or had a $1,500 balance.
Notice the credit union rewards me for using my debit card 10 or more times per month. They don't penalize me if I don't. I'm not out anything if I prefer using cash or other payment methods. Being not for profit and community based, the credit unions haven't been part of a corporate culture which is out to maximize its profit regardless of the impact on people and communities near as much.
Here is a comparison of checking account fees at the 10 largest banks.
There are also a lot of free ATM's I can use due to The CO-OP network, an alliance of credit unions that offer surcharge free ATMs. The linked article talks about how big banks are losing the ATM advantage:
As credit union membership has grown though, the industry has made strides on the accessibility front. The CO-OP Network, an alliance of credit unions across the country, offers surcharge-free ATM access at 28,000 ATMs in the U.S. That's only a shade behind the 29,000 ATMs nationwide offered by Citi.
Also, overdraft fees are lower at the credit union if you aren't overdrawn much. The first two overdrafts in a year are $19. That's still a lot, but less than the big banks.
There's been a lot of talk Bank Transfer Day isn't hurting the banks much, because it is mostly smaller accounts being moved. Also some say the banks have deposits well in excess of loan demand, so they welcome losing some deposits. In my opinion, this is both a short sighted view and ignores a few growing realities. Markos has written that cities may be starting to move their money out of big banks and into credit unions. And churches, law firms, small businesses, and even a 1%er. This could grow because there are a lot of organizations and people in this country concerned about economic justice and credit unions provide a better and viable alternative.
I think it is likely the big banks welcome smaller accounts because they know a certain number of them will incur service charges and high overdraft fees. The banks earned $38.5 billion in overdraft fees. Also, I suspect checking accounts are a way to get people in the door. Once there, people may get a car loan, credit card, mortgage, IRA, or other products that are more profitable. The customers who move their checking accounts to credit unions will probably use the credit union for other financial products in the years ahead.
With all the unpredictable, excessive, and hard to understand fees, Is it any wonder there are millions of unbanked Americans who use Wal-Mart's financial services? Yes, there are fees associated with that, but they are not unpredictable or hard to understand. And people don't have to worry about being put in a jam due to overdraft fees that pile up. Many banks deliberately process the largest transaction first so the customer incurs multiple overdraft fees, not just one overdraft fee. That can add up to $60, $90, even $120. How many Americans would be unable to buy groceries, gas or pay other bills if they got an unexpected fee like this? Here's the story of an unemployed man who incurred $175 in overdraft fees for that very reason.
Look at this from the above linked New York Times article:
In research conducted a year and a half ago, Wal-Mart found that more than 60 percent of the customers using its financial services had bank accounts. When Wal-Mart asked those people how much their banking activities cost them over the last six months, the answer was between $200 and $400, Mr. Eckert said, with overdraft fees, minimum-balance charges and so forth.
Can you imagine spending between $200 and $400 on bank fees in 6 months? That's between $33 and $66 per month.
Did you know Americans spend more on overdraft fees than on fresh vegetables?
Who are the unbanked? I found an FDIC survey on the unbanked.
Also, the big banks charge excessive fees and jack your interest rate way up if you are a little late in making a credit card payment. All for being a few days late on a payment.
I was recently asked what my thinking was in switching to a credit union. I said these big banks got a huge taxpayer bailout and what did they do with it? They kept it all for themselves using it for mergers, executive bonuses, and dividends. Did they use public money to help people facing foreclosure? No.
I repeated credit unions are not for profit. They are member owned, not shareholder owned so they aren't part of a corporate culture that is out to maximize profit at any cost to people and communities.
In my opinion, Bank Transfer Day was just waiting to happen but it seems to have taken corporate elites by surprise. True, the big banks aren't the only example of corporate greed. We have it in every industry. But they were unusually vulnerable. There's a lot of public anger about the bailout, the home foreclosure crisis, and high bank fees. There's a lot of anger towards oil companies - but people have to get gas. In this case, credit unions are both a better and viable alternative and that's a big reason Bank Transfer Day has the potential to keep growing.
Bank Transfer Day may be one example where good capitalism can drive out the bad. Normally, it works the other way around.
Yesterday, we learned the plutocrats are coming. Yes, we live in the Citizens United age. Yes, they have a lot of money and power. But the times are changing. There comes a time your reputation is so bad, that nobody is listening to you. I read last night after the Savings and Loan debacle, it took the industry 15 years to recover its reputation. I wish I had the link still! The current debacle is much more severe and impacted the public much more directly through foreclosures, unemployment, and plunging house values. How long will it take this time?