Related topics: banking, banks, credit unions, credit cards, ATM
The notices started coming. First one credit card was raising its rate, then another. Looking for a way around a 19.99% interest rate, I contacted a large local credit union and was immediately offered a credit card at 6.99% interest.
Even more exciting, a credit union representative uttered those four little words I'd been longing to hear: no balance transfer fee.
That's all it took for me to switch. Others point to better customer service, higher interest rates on checking and savings accounts or the "unfair or deceptive" practices used by bank credit cards as reasons they've kicked big banks to the curb.
Tired of chugging along like a cog in a corporate wheel? Feeling a little credit-union curious? Read on for stories of people who've suffered the last straws and switched.
Fine-print fiasco
Mike Phinney, a technical director from Baltimore, says he switched his checking, savings and credit card over to a credit union after his bank changed ownership -- and the language of his banking contract -- allowing it to take his money.
"I had these two household accounts with about $600 each, money I was holding on to for renovations," he says. "But then my bank changed the language of the contract, saying that if an account doesn't remain active, within 30 days you start to accrue penalties."
Phinney says he wasn't aware of the change until he went to purchase something using one of the household accounts and found it was empty. Ditto for its twin. When he contacted the bank, the news got worse: He was told he owed the bank money, thanks to penalties he'd accrued from having two inactive accounts.
He argued with two managers, who finally agreed to remove the balance due. But they kept the $1,200. "That's when I pulled all my money out of the bank and switched over to a credit union," Phinney says.
There were other reasons, too. Phinney's bank had refused to budge from the 17% interest it charged for his credit card (the credit union offered him 6%), and the customer service at his bank, he says, was getting worse.
"They couldn't make the simplest decisions without calling the head office," he says. "It was becoming very impersonal. At the credit union, though, it feels like the good, old-fashioned customer service that people long for. They're friendly; they know you by name. It's like the old family bank."
Credit unions are member-owned, while banks are run for the benefit of shareholders.
Prompted by penalty fees
Penalty fees also drove Liz Washer, a communications director from Amherst, Mass., to switch her checking and savings accounts to a credit union after being with the same bank for more than eight years.
"I watched my checking account very closely, but in eight years, you're going to make a mistake here and there," Washer says. "I finally goofed and paid a bill before my paycheck cleared. The account was overdrawn for about a day, but a bunch of little ATM charges and bills went through on that day."
Washer hadn't paid extra for overdraft protection ("I find the concept of paying for a checking account irritating"), so she was hit with a slew of penalty fees. When the same thing happened a year later, she was hit again -- not just with $200 in fees, but with attitude.
She knew it was her fault, but the fees felt punitive because she'd been a customer for so long. "So I called customer service," she says, "and was handed off to a very strident manager who smugly reminded me that the same thing had happened before. That's when I told her I planned to move to a credit union."
Washer says she's found the credit-union policy regarding overdrafts much more accommodating.
"They charge a fee, but you have to be a repeat offender," she says. "And they let you know quickly if your account goes into the red. My bank would send a letter, which is a great way to guarantee you won't know for a couple of days. It's like they're hoping you don't notice too quickly so they can charge you every time something goes through."
Another plus: Washer's credit union doesn't charge a fee every time she uses an ATM.
"The bank ATM fees were annoying," she says. "I was usually being charged around $4 in fees to withdraw cash. At the credit union, they reimburse any ATM fees."
Lack of interest
"I try to pay off my credit cards every month, but in 2007, a payment arrived late," says Heather Murphy, a communications director from Chandler, Ariz.
As a result, Murphy's bank raised her interest rate from around 17% to an "obscene" 23%. Not surprisingly, Murphy contacted the bank to see whether there was a way around the higher rate, but the bank simply pointed to the terms and conditions regarding late payments.
And then it did something else. The bank told her she wasn't their kind of customer.
"The message I received from the bank was that they weren't interested in keeping my business because I didn't keep a rolling balance," she says. "I told them, 'Look at my history, look at all the years and years I've been with you,' and they said, 'Yeah, you typically pay off your balance every month.' I said, 'Yes, I do, isn't that awesome?' and they said, 'No, not really. We make money off of people who don't pay off their bill.'"
Miffed, Murphy talked to a credit union and was told that with her spotless credit history, she would be eligible for a 7.9%-interest-rate credit card.
"After learning that, I was kicking myself for even having a credit relationship with my bank," she says.
Interest was also behind the switch for Kelly Quintanilla, a marketing director from Grand Rapids, Mich., who had been with the same bank since she was 12.
"I stuck with them through high school, college and the early years of my career," she says, but when a local credit union advertised a 4%-interest checking account, she switched. "I thought I'd try it since I was earning pretty much no interest on my savings at the bank."
She got her car loan there for a low rate, too.
Big versus little
There are trade-offs, though, when it comes to switching from a big bank to a cozy credit union.
Michael Hanley, a certified public accountant with more than 300 small-business clients, says credit unions have offered his clients better loan rates and better business practices. (One customer was regularly paying about $1,500 a month in insufficient-fund and bounced-check fees, simply because his bank posted debits first and deposits last, even for deposits made first thing in the morning.)
But they can also mean more work on the bookkeeping end.
"Their bank statements tend to be fairly archaic," Hanley says. "And their online banking systems tend not to interface with QuickBooks as often as regular banks', so there can be a huge data-entry component."
Others point to a lack of locations as an issue.
"The lack of branches is the biggest problem for me," says Janice Sellers, an office manager from Oakland, Calif., who recently switched to a credit union after suffering a series of "rapacious" bank practices. Parking at her credit union is hard, and the hours don't mesh well with her work schedule.
Still, the pluses seem to outweigh the minuses for many.
"It's smaller, it's more personable, and it's definitely easier to get questions answered," says Washer, who adds that switching to a credit union sooner could have saved her close to $500 in penalty fees. "Plus, for me, it's like the whole 'buy local' thing. Credit unions are doing well in terms of getting local customer loyalty. The financial crisis has just made people look at larger institutions with deserved skepticism."
