Nov. 5, 2011, also known as Bank Transfer Day, marked a new era in banking. Fed up with excessive fees and poor customer service, customers at big banks quit putting up with the abuse and started taking a proactive role in their own finances – moving their money to credit unions in droves. However, it seems the fiery passion for community banking has tempered to nothing more than a warm glow.
There was no Bank Transfer Day in 2012. Kristen Christian, the day's creator, told media she didn't want to create a distraction from voting during a presidential election year. However, with a key piece of credit union legislation on the ballot in 2012, Bank Transfer Day could have been vital to reintroducing the voting public to the benefits of credit unions.
Could it really be the average consumer just doesn't care that much anymore? Erica Volpe of Money Federal Credit Union thinks so. "Our institution actually didn’t see much traffic from Bank Transfer Day," she says. "Credit unions had their 15 minutes of fame in 2011, but like all media blitzes, it faded with the next big story."
On the other hand, it may be the movement from big banks to credit unions has simply grown quieter. The Credit Union National Association reported earlier this year that after membership at not-for-profit financial institutions hit an all-time high in 2011, it did so again in 2012, with credit union membership surpassing 93 million in the second quarter of last year. "Once [bank customers] make the switch to a credit union, members never turn back," Volpe says.
Even so, no matter how many new members credit unions gain, the number of customers banks have remains exponentially higher. So, what type of institution do Americans truly prefer?
Banks vs. credit unions: a modern-day comparison. Regardless of preference, there are a number of advantages and drawbacks to each type of financial institution. These include:
Accessibility. According to the Federal Financial Institutions Examination Council, there are roughly 6,000 banks – operating close to 100,000 branches and holding a total of $7.4 trillion in deposits. But due to numerous mergers, as well as the growing popularity of mobile and online banking, the number of physical branches is rapidly declining.
Unlike banks, according to The Financial Brand Credit Union Industry Outlook, the total number of credit union branches has grown – increasing from 20,694 in 2007 to 21,433 in 2011 – with only the largest credit unions adding branches. (The top 100 currently hold 14 percent of all branches.) Granted, this is still substantially lower than the total number of bank branches in existence.
To make up for this limited physical presence, many credit unions participate in ATM and branch-sharing networks that allow members to perform transactions at other credit union locations. The CO-OP ATM Network, for instance, provides credit union members access to more than 30,000 surcharge-free ATMs, some 5,000 branch locations and more than 2,000 self-service locations nationwide.
Fees. Banks are notoriously associated with excessive fees, though a common misconception is credit unions are conversely fee-free. Credit unions also charge fees, although considerably fewer on average than banks.
A study last year by Consumer Reports compared average fees on common financial products and services between banks and credit unions and found credit union members (when charged) generally enjoy lower fees than bank customers. Here is a detailed comparison of credit union fees versus bank fees:
|Non-interest checking monthly fee||$10.27||$6.00|
|Online bill pay fee||$6.95||$0.00|
|Out-of-network ATM fee||$2.21||$1.07|
|Stop payment fee||$31.09||$19.43|
|Data: Consumer Reports, February 2012|
Interest rates. Deposit interest rates today are low across the board. As such, no one is getting rich off the difference between a 0.12 percent annual percentage yield a credit union may offer on a savings account and 0.21 percent APY a bank may offer.
In terms of loans, the gap narrows: Credit unions tend to have slightly lower rates, though again, the disparity is minimal. Here is a sample of the Informa Research Services weekly rates snapshot for a more in-depth comparison:
|Data: Informa Research Services, June 2013|
Customer service. Despite seemingly deteriorating reputations, banks have in fact been gaining consumer confidence. According to the 2012 American Customer Satisfaction Index, banks scored a 77 percent customer satisfaction rate – an increase of 2.7 percent over the previous year.
Meanwhile, credit unions – known for their outstanding customer service – have fallen in ACSI rankings by 5.7 percent to a score of 82 as of 2012. Nonetheless, out of all banking services, credit unions remained rated better than banks.
Casey Bond is the managing editor of www.GoBankingRates.com, your source for the best interest rates on certificate of deposit rates, savings account rates, personal finance news and more.