Consumers Flee to Credit Unions over Rising Bank Fees

Not-for-Profit Credit Unions Offer a Haven for Consumers

 

Credit union membership starts the year 2012 at an all-time high: 91.8 million members and assets of $961.8 billion. More than twice as many people opened new credit union accounts in 2011 than in the year before.

 

A big wave of new deposits occurred in the last months of 2011 in response to Bank of America’s announced plans to charge a $5 monthly fee for debit cards, the Occupy Wall Street movement, and a national "Bank Transfer Day", November 5, organized by consumer activists. On that day, about 40,000 new credit union accounts were opened, culminating a huge surge over several weeks. The Bank of America debit card fee was rescinded, but bank fees continue to be a motivator in the migration to credit unions.

 

“Consumer frustration with Wall Street motivated people to explore the value of Main Street credit unions,” said NAFCU President and CEO Fred Becker. “Credit unions’ outstanding service, low fees and competitive rates got them to stay.” Membership growth was 17.6 percent above average for the past five years.

 

For every dollar in the nation’s credit unions, there are more than 13 dollars in bank deposits. That gives credit unions a huge growth potential, especially if major banks try to squeeze more fees out of their customers. Wells Fargo, BofA, Citibank, and Chase continue to test new fees, increased minimum balances, and other adjustments in their services in order to compensate for the financial and legislative issues that they are facing. A significant challenge has been the “Durbin Amendment” which cut the fees that they are allowed to charge merchants for debit card transactions.

 

Big banks may actually welcome the idea that some consumers will flee to credit unions and elsewhere. A JPMorgan Chase official a recent investor conference said that big banks lose money on most customers with less than $100,000 in deposits and investments.

 

 

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