Fed Up With Fees

Recently, there has been intense discussion regarding the new fees being imposed on customers by "big banks." When Bank of America announced the $5 fee it planned to impose on debit card users at the beginning of 2012, folks...went...crazy. Bank Transfer Day was organized in an effort to hit big banks where it hurts. Well...it worked.

In the month or so since this announcement was made, the news has reported that more than 650,000 "big bank" users have taken their money and accounts elsewhere...to credit unions. To give you an idea of how major this is...

• Credit unions across the nation normally see 650,000 new customers every year. To get this many in one month is a major increase for them.
• Bank of America has experienced a substantial drop in their stock price since losing so many customers (and thus so much money).
• Bank of America (and all other big banks: JP Morgan Chase, Wells Fargo, etc) have taken back their plans to impose monthly fees for debit card use. 

I guess Americans are sending a major message to "big banks." Something along the lines of....eff you, pay me.

In hearing this on the local news, I realized that I, a "big bank" customer (and lover, might I add),  don't really know the difference between credit unions and banks.  I decided to check it out and jot down the following lists of differences:

Banks

• for-profit
• publicly traded
• larger selection of products (retirement plans, investment plans, usually not offered by credit unions)
• regulated by Federal Reserve
• more ATMs and branches
• easy to join
• less personalized service
• primary focus: making money

Credit Unions

• not-for-profit 
• owned by members of the credit union
• members share a commonality (belong to the same church, school, employer, etc)
• regulated by National Credit Union Association
• limited locations
• limited range of product offerings
• higher interest rates on savings accounts (than banks)
• lower interest rates on loans (than banks)
• hard to find and join
• more personalized experience
• primary focus: making customers happy

A few important things to note about the above lists:

1) Because credit unions are non-profit entities, they are not subject to state and local taxes, have far less marketing expenses,  and don't have to pay out high executive salaries, like banks. These limited expenses allow them to offer higher interest rates on savings accounts, lower interest rates for loans, and lower or no fees on checking accounts, late payments and overdrafts.

2) Because credit unions are more concerned about pleasing their owners (the customers) they offer more educational services and seminars to teach customers about financial products and how to make smart financial decisions. Banks are less inclined to want you to be financially savvy because they are interested in making money.

3)  For both credit unions and banks, customers are insured up to $100,000. Just in case you're ballin' and thus this poses major cause for concern. lol.

I'm a big banker, but this list has definitely made me think twice about looking into credit unions. They could prove to be an awesome option as us 20-somethings to save for and purchase our first homes, kids' college educations, and retirement. This Bank Transfer Day just may have led to the rise of the credit union and if it saves me money...I'm not mad at that!

Update: I found this article about folks like me who are addicted to their big banks. Check it out.
I'm Addicted To My Big Bank