In December 2009, consumers fed up with high credit card interest rates and the seemingly anti-customer practices of “too-big-to-fail” banks launched the “Move Your Money” movement. And it seems to be taking hold.
However, the shift began even before this launch. Membership at credit unions grew by 2% in 2009. As of February 55% of community banks and credit unions reported that they had seen an increase in new deposit accounts.
Credit card interest rates are one reason for the switch. A study last summer showed that credit card interest rates at the 12 largest credit unions averaged 3-4% less than interest rates at the 12 largest banks. And, unlike banks, Federal Credit Unions must adhere to an 18% cap on interest rates – whether for credit cards or consumer loans. As we’ve seen, the big banks have no cap on the interest rates they can and will charge.
But there’s more. Small banks and credit unions also tend to pay more interest on deposits and often run specials to attract new depositors. And since credit unions are member-owned nonprofit organizations, they also pass surplus profits back to their customers in the form of dividends and low fees.
Another advantage to moving to a small bank or credit union is personal service. These institutions pride themselves on getting to know their customers. So if you appreciate being greeted by name when you enter your bank, moving your money might please you.
The move isn’t for everyone…
If you rely on the services that only a large national bank can offer, you may be frustrated by banking with a smaller institution.
For one thing, you could find yourself having to use another bank’s ATM when you want to withdraw money. Fees for that service run from $1 to $3 for every withdrawal. However, most of these smaller institutions do belong to an ATM network that provides fee-free access at over 25,000 locations nationwide. You just have to keep track of which banks belong to this Co-Op Network.
Customer service, while friendlier, probably won’t be available 24 hours. In fact, if you need to contact customer service, you may be limited to calling between 9 and 5, Monday through Friday.
Not all small banks and credit unions offer full service online. Some do, some don’t, and some charge for the service. So if you enjoy online bill paying and mobile banking, check for availability before you make the switch.
As with any financial decision – get all the details before you act. Along with fees and practices, be sure to check the details associated with the credit cards they offer.
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