November 5th was a historic day for banks in America. Bank Transfer Day did not cause large banks to fail, but it did unified common folks behind a dissatisfaction message. The organizers of the day were pointing to banks' greed and persuading public to transfer their checking and savings accounts to Credit Unions rather than continue banking with global banks. While Bank Transfer Day message was speculated by some media outlets to be a hidden advertisement of Credit Unions, it was welcomed by thousandths of consumers across U.S.
So, What is a credit union?
Credit unions are member-owned and controlled nonprofit financial institutions. Providing members with competitive rates, promoting community development, and encouraging thriftiness are some of the objectives of credit unions. Because they are not-for-profit organizations, credit unions are not required to pay taxes. Furthermore, they cannot sell company stock. The vast majority of Americans choose to bank with major banks like Chase or Bank of America, but believe it or not, a large number of Americans do business with credit unions instead. There are actually 91 million credit union members in the United States. That is nearly one in three people. Moreover, there are 7,200 credit unions across the United.
How is a credit Union different from a regular bank?
One of the major differences between a credit union and other financial institutions like the major banks, is that account holders, that is to say, members, are also part owners of the credit union. The board of directors is elected by members in a democratic one-person-one-vote system. The amount of money invested in the credit union does not affect a members ability to vote or their voting power. The member-elected board of directors also decides on policies concerning services like interest rates and and fees. Credit unions provide members with many of the same financial services as regular banks, like savings accounts and checking accounts. However these services are often called different names than what most people are used to.
What is Bank Transfer Day and how is it related to credit unions?
Bank Transfer Day was created by 27-year-old Los Angeles resident Kristen Christian when became fed up with her Bank of America service and fees. She switched over to a credit union and then using Facebook invited her friends to do the same. After starting a Facebook page to promote Bank Transfer Day, she got more than 85,000 RSVPs. The movement ended on Nov. 5, but prompted record numbers of account openings with credit unions across the country. Other movements have sprang up in the footsteps of Kristen Christian, like the Balance Transfer Day, planned by protesters on December 11, 2011.
What are the advantages of banking with a credit union?
Historically, credit unions are renowned for their stellar customer service and commitment to helping members improve their finances. Rupert McAllyster, an analyst with Credit-land.com, says that more than three-fourths of credit unions offer members no-strings-attached free checking accounts, compared to only 45% of banks. Research firm, Moebs Services Inc., reports that the annual cost of maintaining a checking a account with a credit union is cheaper than with one of the major banks: $175 to $250 compared to $350 to $450 respectively. Credit unions also provide service to customers in rural areas that do not have other options for banking. They are also geared to customers with small balances.
What are the disadvantages of banking with a credit union?
In general, credit unions have few locations and even fewer, if any, ATMs. However, many credit unions have formed networks of fee-free ATMs for members so this gets around the lack of ATM issue. Credit unions also do not offer the full extent of services that most major banks offer. While they are increasing available services, you are likely not going to find a credit union to loan you $50,000 as a student loan.
- Credit Unions
- Bank of America