More than 650,000 Americans created credit union accounts in October, a figure that reportedly surpassed the total created in all of 2010.
The mass migration came as U.S. banks like SunTrust and Bank of America announced (and subsequently canceled) policies to charge customers a monthly debit card fee. As information about the new costs accompanied daily reports from the anti-corporate “Occupy” protests, thousands removed funds from their banks and shifted them to a local credit union.
Many consumers will ask what the difference is between the two options. According to Finance Professor Elinda Kiss, the biggest distinction is with the structure of each organization.
Banks’ day-to-day operations and decisions generally rest in the hands of its CEO and board of directors, which can often limit transparency. On the other hand, credit unions are owned and managed by the customers with active funds, and each contributor has an equal say in the operations of the union.
Many credit unions are organized regionally, and admittance into certain unions can depend on a customer’s geographic location or occupation. The State Employees Credit Union (SECU) of Maryland, for example, is open to all of the state’s employees along with the members of organizations the union partners with.
In the past, there have been more hurdles for customers to join a credit union, but it’s been increasingly easier to make the switch. Senior engineering major Jon Cohen opened an SECU account last month, citing his disgust of big banks as the biggest trigger.
“Banking institutions preyed on normal everyday Americans, driving them into debt, kicking them out of their homes, and causing mass suffering unseen for a developed country,” Cohen said.
Cohen also mentioned that the absence of most fees within credit unions lured him away from his old bank.
“To join all you have to do is start with $10 in the credit union, which is incredible,” he said. “They don’t have ridiculous rates, hidden fees, or predatory loans. It’s non-profit, and when the credit union actually makes a profit, it translates this by lowering the fees and rates to its members.”
With so many benefits, why haven’t even more customers switched their funds over to a credit union? Kiss said that credit unions often offer fewer services than a bank, and many people are tied to the long-standing relationships with their bank.
“People find it tougher to leave banks because they have all these relationships and services like online bill paying,” Kiss said. “But when they instituted the $5 debit card fee, that really got people riled up.”