I joined a credit union about eight years ago by opening a checking account, and enjoyed the experience for the most part. It was the first time that I had opened a financial account since the institution of new rules for financial organizations resulting from attempts to prevent money laundering by terrorist groups. Overall, it was painless, but then I had no problem establishing my identity.
The credit union experience was mixed. I chose the largest credit union (CU) in the area because they seemed to offer the most services of any of the local CUs, and because they were right down the street from my office. Our office has since moved, but the CU did not move with us (that’s not a criticism, btw). The people were exceedingly friendly, much more so than at my bank. I do have to say that most of the people at my bank are friendly, but occasionally you find that woman who wants to make things hard on you, and she’ll use her position as teller in order to do it. I didn’t have any negative experiences with the staff at the CU at all. If there was any problem, or misunderstanding on my part, they were eager to help or to answer my question if I managed to bring it up. The CU did have fees, and those fees were comparable in every way to the bank. I did not see any benefit, fee-wise, to joining the CU, which is not what many will have you believe. That said, other CUs in the area do offer lower fees. This CU did not. There was a benefit to being a member of the CU that wasn’t mentioned when I signed up, however, and that was a very good rate on a car loan. It just so happened that when I purchased a car, the CU offered the best rate and it showed up in the offers because I was a member. I have since closed that account, because it was now too far away and for other reasons that I will lay out below.
On to the fees. When I compared the fees, I saw little or no difference between the bank fees and the CU fees. That situation has changed recently, with my local bank instituting a new, aggressive fee structure for what were previously free accounts. They’re also charging considerably more for ATM access. There are ways to avoid these fees, but we’re talking about $10/mo for low activity. To prevent the $10/mo charges you have to have 5 electronic transactions each month with an entity unrelated to the bank. Ordinarily this would not have been a concern since I manage to do this easily with bill payment, occasional use of the debit card at the grocery store and online transactions, but a couple of years ago the bank made what seemed like a good suggestions. Opening a new, free checking account.
Open a new checking account for online transactions and debit purchases that is separate from the main account. Here’s why I liked this idea. One – When I signed up for the account, it was free. I could keep under $100 in the account without a problem. Two – It insulates my main account from online activity and hacking attempts. If someone manages to access the account after hacking a website where it was used, they’re not going to get much from it. I keep it under $100 at all times. There is no overdraft protection on the second account, so purchases or other access attempts that try to overdraw the account will be rejected by the bank. This represents a minimal loss versus a potential loss of thousands of dollars. Three – I have the ability to transfer money instantly between the two accounts, so that online purchases are simple to make, with only the added step of logging in, moving the total being purchased from one account to the other, and completing the transaction. The added step may seem like a hassle, but they have made it so simple that there seems to be no reason not to do it. I can also do it from my phone. Four – With my bank I’m able to make all of my payments online and have access to considerable electronic financial options. The one thing that I wish that my bank had, which other banks do have, is the ability to deposit a check using my phone. Otherwise, their services are pretty good. The problem with this checking account is that it’s now subject to fees that it wasn’t subject to when I applied for it. There is now an account balance minimum or a transaction minimum. Since I use this account mainly for online purchases it is sometimes difficult to make the 5 transaction minimum for the month.
Because of the radical increase in banking fees and the flippancy with which banks change their policies, I have been taking another look at credit unions. The fees at the CUs have not kept pace with the banks and are an attractive venue for personal finance for that reason, but there are still issues. My previous credit union experience, while positive in terms of the people who worked there, was flawed. There were conveniences that the bank offered that the CU did not offer or that simply did not work when they were offered. They each gave me an ATM card. The bank’s card worked flawlessly from the word “go” but the CU card was another story. I could insert the card into their machine and access the machine, but I could not do anything with my account. I was unable to make deposits with the ATM card. I was unable to make withdrawals with the ATM card. The ATM card did not work. This meant that I had to drive to the closest branch, which is across town. Since my office is now in a different location I don’t have much need to be on that side of town very often, and certainly not often enough to warrant having an account at that CU when it requires a personal trip to that branch in order to accomplish anything. When I would try to use the CU phone service I was unable to reach people because they were usually not there. The hours were not compatible with my life and the phone service was second rate.
The online experience with the CU is also lacking. They don’t have the same instant transfer service that the bank offers. You have to wait for your money to move from one account to another before you’re credited with the transfer. The bank makes this easy and immediate. The CU also does not have a phone app. The banking app does more than find cooperative ATMs. It also allows the transfer of funds and checking of the account. Many banks offer the ability to take a photo of a check so that it may be deposited. These services are not available from the CU, which makes it more difficult, or almost impossible, to use a second account to lower the risk from online activity. Instant access to your funds is simply unavailable. Some CU’s might offer that, and I don’t know if they do, but if they do they’re not located nearby.
Credit unions have a large collaborative network that should allow them to offer these services at a reduced rate, using applications that can be privately branded for each CU so that they’re not forced to develop each on an individual basis. What I believe is that many CUs are simply unable to step up to offer these services because of the way that they’re structured. CUs are governed on an individual basis by an elected board. The people in charge of the CU may not see a benefit to offering these services because they’re set in their own ways. I don’t know. All I know is that they are, in some ways, living in the stone age of financial account access when compared to modern banks. 1980 is long gone, but many CUs are still stuck there. The people running the individual CUs need to know, understand and use these services so that they can see how the services fit into the lives of their members.
I want to join a credit union because I believe that they provide a solid grounding for the financial sector. Modern banks have taken a jackhammer to the foundations that existed prior to the repeal of the Glass Steagall act. Regardless of what many in the financial sector will tell you, the repeal of Glass Steagall was a major factor in the creation of the housing bubble that was popped in 2007. The banks were allowed to act with impunity, and it took years for them to stabilize following the crisis, and they created a liquidity trap during this stabilization process that nearly led to the collapse of our economy. This was because of the way assets were structured and they spent a considerable fortune shoring up their assets during the meltdown. The largest banks in the country were propped up by the federal government and smaller banks failed in near record numbers. Some of the banks that thrived during those years were banks that refused to leave the foundation of sound practices set in place by the Glass Steagall act in the first place. Credit unions also thrived, because they were unable, or unwilling to engage in the same risky schemes that Chase, Citi and Lehman Brothers chose for their business models. They were bastions of stability throughout, with a few exceptions due to fraud, and I believe that they will continue to offer this stability in the foreseeable future.
But credit unions need to step up their game if they want to remain relevant in our economy. They need to modernize the basic services that apply to their business model according to the way that people function. We use our computers and our phones. Many of us don’t write dozens of checks every month. These are new ways to manage accounts and CUs simply have not been keeping pace. Automated teller machines are decades old now, and are an aging technology, and the ATM for the largest CU in our area was unable to provide a working service out of the gate. I’m afraid that by the time they get the ATM working the way it should, people will have moved on to other ways of using their service. Older generations are dying off and newer generations don’t want to manage checkbooks. They’re using their phones, instead. The modern smartphone is one way to offer those services. It is no longer a phone. The phone app on a mobile phone is quickly becoming a secondary feature. It’s a personal life management device, a personal computer in the truest sense, and it’s being rapidly adopted as such as technologies simplify complex tasks and security improves. This is just one example of the changes in the marketplace. The CU industry needs to see this and move forward with adoption of modern services. Until that happens, I will reluctantly stick with my bank.