Credit Unions

I haven’t had a bank account for over 26 years. Instead I do business with the Taylor Model Basin Federal Credit Union. I love my Credit Union. It is definitely a desirable fringe benefit for employees of my laboratory and their family members. When I first started working in a textile mill back in the 1970s Credit Unions paid more in interest than banks and charged less when lending their members money but could not offer checking accounts or other services. Today they are full service financial institutions. Credit Unions typically kill commercial banks both on interest rates and on fees. U.S. News and World Report notes, “Credit Union customers saved $6.78 billion in interest and fees compared to bank customers.” Credit Unions are not for profit co-ops not for profit corporations. It makes a difference.

There is more to it than that. My Credit Union is one of those places where everybody knows your name and they are always glad you came. The board of directors are my coworkers. The employees have seen me every week or so in some cases for decades. They know me. They know my quirks. They know my behavior patterns. In one case they even called me when they saw an incoming debit to my account that they did not understand. You simply are not going to get that kind of service from one of the large national banks unless you have several millions on deposit. My mother-in-law had several accounts at the same Wachovia branch for many decades. They treated her well. After the death of my father-in-law they even assigned an employee to keep an eye on her accounts. Then Wachovia went bankrupt and was acquired by Wells Fargo. The transfer process was unnecessarily frightening and complex. Adding my wife’s name to her mother’s safety deposit box proved impossible even though her name is on every single one of her mother’s accounts and she has durable power of attorney for her mother. It wasn’t the employees’ fault. Lord knows they were trying, but they just couldn’t make the computer accept the facts. In the end we had to close down one safety deposit box and open another, ridiculous.

Unlike Wachovia, my Credit Union was never in any danger of bankruptcy. They are in business to lend money to their members, who in this particular case are Government employees. Since our paychecks are direct deposited to our Credit Union accounts, these are pretty safe loans. Credit Unions didn’t get involved in the derivative markets that took down the Bank of America, Citi Group, Wachovia, and others. They just made simple boring loans to boring reliable engineers with secure jobs.

There are some downsides to Credit Union membership. There is only one branch office for my Credit Union. This will complicate things when I retire and leave the area, but since most Credit Unions are part of a network of 28,000 surcharge free ATMs perhaps I will be able to get by with a separate account in a small local bank or a bank account with the Charles Schwab Bank, affiliated with my broker. By the way, Charles Schwab Bank offers some pretty good deals.

Back on November 5 a grass roots protest organization promoted something called Bank Transfer Day. They encouraged everyone to leave their big bank for a smaller bank or a Credit Union. This particular protest was fueled by the big banks’ plan to start charging a monthly fee for debit card use. Although there were enough outcries to put that particular fee on hold, they will be back with more and higher fees. Recent financial reform legislation cut into their profits. The big banks will find a way to make up those losses.

Even in trying to leave their bank customers discovered there were fees as high as $25.00 to close an account. In many cases these customers were forced to talk to a manager before closing their accounts. Some retaliated by leaving one penny or one dollar in their account. “The Credit Union National Association, an industry trade group, estimates that 650,000 consumers joined Credit unions in between Sept. 29 and the first week of November.” (Wall Street Journal), so I guess this can be classified as a successful protest. However, the large banks are awash with Federal bailout money so they probably are not really missing those little accounts.

One more reason why I believe too big to fail = too big to exist.