Most of us agree that banks that are too big to fail are banks that are too big. The Big Banks (that's capital 'B' Big Banks: JP Morgan Chase, Bank of America, CitiGroup, Wells Fargo, and Bank of New York Mellon round out the top five in the United States.) seem to just keep getting larger and larger. This is generally achieved by gobbling up smaller banks whenever possible through mergers and acquisitions. Mother Jones recently posted a chart perfectly illustrating this.
I get it, finance talk isn't very exciting, except to accounting nerds like me, but there is something very easy you can do to help take down Big Banks. It's not complicated, it won't cost a thing, and it might even save you money.
That simple thing you can do is dump your bank and join a credit union.
Aren't Credit Unions and Banks the same thing?
Credit unions and banks perform the same functions and offer most of the same services. One of the key differences is that banks are owned by a corporation, or a family, or some sort of consortium. They may be publicly owned through the stock market or privately owned. On the other hand, Credit unions are owned by the people who hold accounts there. That's right, if you have an account at a credit union, you own part of that credit union. Oh, and credit unions are not-for-profit, which means they won't overcharge you just to make more money for some fat-cat owner kicking back somewhere watching his money stacks grow.
Why does bank ownership matter?
In the simplest terms, bank owners will look out for their best interests, regardless of how they line up to your best interests. Their main interest is making more money for them, personally. By contrast, you are part owner of a credit union. You vote on leadership, you may attend annual meetings, and you get a return on your money by way of lower fees, lower interest rates on loans and higher interest rates on your savings accounts. The really cool thing? Since you're part owner, you're called a Member, not a Customer. That means the owners (you) help make your community stronger. Credit unions make loans to local, small businesses in your community.
Is my money safe in a credit union?
Just as banks are governed by the Federal Reserve, credit unions are regulated by the National Credit Union Administration, or NCUA. Your money is insured to the same amount as banks, but through the NCUA instead of the FDIC. Credit unions must follow all the same lending laws, and may actually have a couple additional hoops to jump through.
Will customer service be the same?
Customer service just might be better and more personalized. Credit unions do vary in size, some are much larger and offer a wider array of products, but credit unions in general have banded together and created the Credit Union Cooperative Network. They offer their own ATMs at no charge to all credit union account holders in the network, and their members get the same courtesy in response. That means ATMs could be national, free of charge no matter how small your credit union. Your credit union may also reimburse you for ATM fees, whether or not they're in the Co-op network.
Some credit unions deal in areas that need a financial boost providing services to the under-served, and they seem more willing to work with the local business owner on loans and services. I know firsthand many of the municipalities in my area use credit unions as their main financial accounts because they earn more money in interest than they pay in fees.
Speaking of those fees, in a time when banks are starting to charge fees for their checking accounts, the trend in the credit union world has been paying interest on checking accounts. I've earned as much as 5.01% and am currently at 2.3%. Even overdraft fees are typically lower at a credit union.
What's the catch?
You do have to apply for membership at a credit union. The easiest way is through an immediate family member who's already a member. Next would be where you live or work. It depends how the credit union is set up, or chartered, but membership could be open to certain communities or companies around where they're located. Many credit unions began as a cooperative of employees of a particular company. If you have auto loan through a credit union, that qualifies you for membership. If that describes you, go open a checking account, and start enjoying the benefits!
I've been a credit union member since I was 18, and I have my mortgage, savings, checking, overdraft protection, a Visa card, a home equity line and a laughable small line of credit from back in my college years with my credit union. It's a family thing, with my parents and brother all members at the same one.
Don't get me wrong, credit unions aren't a panacea to all that's wrong in the financial industry. We need to tighten regulations on the financial sector so that Big Banks can't play monopoly with our money. Joining a credit union probably won't bring down the Big Banks, but don't you want to do your banking at an institution that has your best interests at heart, and not some nameless, faceless corporation? At the very least, won't it feel nice to do something to stick it to the Big Banks?
To find a credit union near you, go to asmarterchoice.org
Tue Jun 03, 2014 at 4:00 AM PT: Thanks for the phenomenal response and all the great comments, everyone!