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Counterpoint to 1042650679's review, "Banks all the Way", or Why Credit Unions are AppealingJul 16 '00 (Updated Jul 27 '00) Write an essay on this topic.Lately I have taken in an interest in reading reviews debating the superiority of banks v. credit unions. While I may have initially been biased toward credit unions, since I have spent several years working at one of the largest ones in the world, I have seen incidents over the last decade that have only affirmed my belief. Service Many reviewers seem to be of the belief that because credit unions offer members lower rates, the employees must also be paid less. Lower pay scale for employees = lower service to the members, right? Wrong. Credit unions usually find one large way to save money: no shareholders. Without the need to pay dividends to shareholders, the credit unions are free to reinvest the money into the organization, offering more training, benefits and bonus dividends on members accounts. To attract qualified potential employees, credit unions set up pay scales that are very competitive to the banks in their area. As a matter of fact, I was drawn to my credit union by the sheer fact that they offered a higher wage than any other financial institution in my city. The attention paid to a customer/member is not completely determined by pay, or even by the type of employee. Many banks offer employees incentives to cross-sell products. The employees are required to meet a set quota for each type of product currently being pushed. If the goal is met, the employee can receive a sometimes very large bonus; if they fail to meet the goal, well, a few down months and you may be finding another job. I find this the banking equivalent of "would you like fries with that", so I quickly realized that I was not destined to work in that environment. With credit unions' field of membership ensuring that account holders share a common bond, they are able to focus the attention and training of staff to meet the needs of these individuals. By hiring employees that have a link to this common interest, the credit union can ensure that the member is treated as family. The employees can relate to the member, and the member feels appreciated for himself, not what is in his account. Fees The fees are all a part of doing business. Does it really cost a financial institution $20 to $30 to return a check for insufficient funds? Or $20 to place a stop payment order on a check? No, the fee schedule is in place as a means to deter account holders from certain activity. One of the biggest issues is ATM fees. When you are charged a fee for ATM usage at another institution, do you know where the funds go? Surprisingly enough, it is sometimes split three or more ways. Your financial institution gets a small bit, the owner of the ATM gets a larger chunk, and a small percentage may go to CIRRUS, PLUS, MAESTRO- whatever network your card using to access that ATM. Why then, have banks deemed it necessary to charge extra fees for using their ATM? The claim is that the cost of placing ATM machines in remote areas (like the mall?) is expensive, and they need to recoup the money. Yet banks have had record earnings for the last few years. You pay a fee, I pay a fee, we all pay a fee. EIEIO. While I have never seen a credit union charge a member for visiting their account in person, I am amazed at the number of people that can and will pay this at banks. With enough complaining, I'm sure that anyone would be able to have a fee waived... and would be reminded that it is a one-time exception, "in the interest of customer service". If someone is spending time every month trying to have fees waived, what have they achieved overall? My favorite area I like that title, mainly because this is the area where I really can bash banks, I mean, try to enlighten the unknowing. I don't think many people realize how much power the ABA (American Bankers Assoc.) holds in the United States. Even though credit union membership is held by roughly 3% of the population in the U.S., the 97% that are account holders at banks does little to satisfy the ABA. They are always alert to ways to make credit union membership less attractive. The most common is by appealing to the Federal Reserve for new regulations on credit unions. One of these regulations is referred to as "Reg D", and you may be familiar with it in another way. Suppose you write a check, content with the knowledge that even though you don't have the money in checking, it is in your savings. When credit unions were first chartered, many offered their members unlimited use of this service. Thanks to lobbying by the ABA, account holders are now limited to six per month "automatic transfers". Big deal, right? With the computerization of the banking industry, you can hit that magic number faster than you think. Transfer money online? One Reg C down. Transfer by ATM? There goes another. Automatic payment transfer from checking to loan? Used another. If you weren't aware of this limit, you could be writing that check, sure that it would be paid out of your savings account. Or will it? The ABA has also spent some time recently trying to impose taxing regulations on credit unions. The biggest reason credit unions earned a non-tax status is because of being classified "non-profit" (of course, the NFL has also earned non-profit status, but I won't even start on that one). By being a non-profit, they are able to pay higher dividends (interest) on member accounts, regardless of balance, and offer lower interest rates, without suffering from quality of service issues. The banking industry reasons that credit unions should consider this small amount as "profit", and have to pay taxes on it. While I am not certain how I feel about this issue, I refer to what I stated before: the banks are earning record amounts, with earnings from fees being partly responsible for this rise. Are we sure that we want one entity to have such control over the entire industry? The banking industry also has been cited for failing to meet the needs of minorities. The decision to move a branch into an area is based on cost-effectiveness for any institution, be it bank or credit union. Since the bank has to ensure the profitability of the site, they are less likely to move into an area that has been deemed "poor". Without account holders that can leave deposits largely untouched, the banks have little to make money on, since the capitol is needed there to lend out; something for them to earn interest on. Credit unions were formed to meet the needs of the those that were considered less than desirable by banks. By grouping these forgotten into one group, they could pool their funds, and in turn help each other out. This philosophy of credit unions is alive and well today. By offering membership to those that can't meet the requirements of banks (minimum balances, credit), the credit unions are allowing these people to help themselves. Having a place to learn to save, cash a check without paying a fee or having to have a hold placed on the funds (or worse, having to have that money in your account) can keep these members from becoming prey to the check-cashing mongers. These money-til-payday places thrive in neighborhoods that banks wouldn't dare step in, and in many places it is up to the credit unions to offer a safe alternative. I don't believe that credit union membership is for everyone. Some people may like feeling part of the pack, or having anonymity. Each person should make the decision for themselves, and their financial habits. Some credit unions do not offer business accounts, so if you are looking for one place to do both, well a bank could be better suited for your purpose. But if you are looking for a place to be made to feel like part of a community, I would give the local credit union a closer look.  |
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