Should you dump your bank for a credit union?
TAMPA - In the history of marketing blunders, proposed debit card fees may rank up there with New Coke and "Howard the Duck." In the last few months, big banks including Bank of America, SunTrust, Wells Fargo and Regions all traipsed out new $3, $4 or $5 monthly fees on debit cards, only to yank them when the public screamed. Credit unions have swooped in to pick off some angry bank customers. Should you join them? Credit unions tend to carry lower fees than big regional and national banks, because they're nonprofit. But, they also tend to be less convenient, with fewer ATM machines and branches. Customer deposits at most credit unions are insured by the National Credit Union Administration, just as the FDIC insures banks. But some credit unions may not take part, so it's best to check.One question to consider is whether you're willing to go through the hassle of unwinding all your direct deposit and online bill-pay arrangements with your major bank. "For all the talk of switching, I think it's ultimately not going to be that much," said Bert Ely, a banking consultant from Alexandria, Va. A California woman kicked off a mini movement when she started a Facebook page called Bank Transfer Day. She encouraged people to ditch their major bank in favor of a nonprofit credit union by Nov. 5. Local credit unions jumped into action. Suncoast Schools Federal Credit Union held raffles for free iPads for people who opened a new checking account by Nov. 5. When you call Grow Financial, the region's second biggest credit union, a recording mentions the banks' ill-fated debit card fees.Leaders of each credit union say people actually did make the switch. In October, customers opened 92 percent more new checking accounts at Suncoast Schools than they did in October of last year. That meant an additional 2,700 or so new customer accounts. Suncoast Schools didn't open any new branches over the year, so Chief Executive Officer Tom Dorety assumes some of the new customers switched from banks. At Grow Financial, new checking accounts were up 120 percent in October over the previous October, said Wes Strickland, that credit union's senior vice president of marketing. Will the momentum stop now that the banks have nixed debit card fees? Strickland said big banks may turn to other new fees to make up the difference. What drove banks to debut the debit card fees was federal legislation called the Durbin Amendment. That amendment limited the amount of money banks could charge retailers when people swipe their debit cards, and it promises to eat into banks' profits. "If there was a willingness by the financial institution to put that fee out there, does that willingness now go away? I don't think so," Strickland said. Small community banks may benefit along with credit unions. In Riverview, Justin Savich may bolt from one major regional bank to a community bank over fees. He runs a real estate business that manages rental properties and invests in real estate. So, he frequently deposits cash rental payments into his business bank account. His banker recently told him the bank would start charging him a fee on some deposits unless he kept a $10,000 average balance in the account. He's not willing to keep that much money sitting idle in an account, so he's ready to leave, he said. In reality, many people may feel that urge but decide it's not worth the frustration of moving their money. A recent article in the New York Times cited a secret known inside banking: the growth of online banking and paying bills directly from one's bank account discourages people from switching. Meantime, big banks may not be that worried about the customers who do leave over fees, said Ely, the bank consultant. Banks believe their most profitable customers are those who have multiple bank accounts, loans and other financial products, and these customers are the least likely to switch banks. "Whatever lingering effect there's going to be is going to have a fairly short half-life," he said.
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