Want to Stick it to the Banks? Join a Credit Union

By Dave Lindorff

A few months ago, like many struggling Americans, I had my credit
line frozen at my local bank. I hadn’t done anything wrong, and have
always paid my monthly installment payment on time, but I learned from
a bank employee at the institution, which had once been a small
family-owned operation but had earlier this year been acquired by a
regional bank, that most of the bank’s home-equity lines of credit were
being similarly frozen and “reviewed” because the bank had lent a lot
of money to a housing development that was underwater and facing
bankruptcy. I was told I could simply apply for a new credit line, and
pay off the old one, but there was a hitch: I’d be paying almost 3%
more per month in interest than with the old loan.

More recently, I went in to the bank with a check I had just
received, a bit late, from a magazine for which I write regularly.
Because the payment was late, so were some of my bills, so I asked a
bank officer, as I had occasionally done over the years, to okay the
check for immediate credit as a courtesy, which would allow me to pay
those bills. I was turned down. “We don’t offer that service anymore,”
he said. “Your check has to clear, which could take two days.” When I
pointed out that what I wanted to pay was my mortgage, which was owed
to the same bank, and that the money, in any case, would be in the
bank’s hands either way, he said, “Sorry, that’s our policy.” The final
blow came when I learned that some company in China had accessed my
account, pulling out first a few pennies in two trial electronic
transactions, and then hundreds of dollars. The bank put a stop to the
problem when I notified them, but it took a month for them to refund me
my money, even though the fraud should have been spotted by them right
away, and it was the bank’s fault, not mine.

Fed up with all these rip-offs, I went looking for an alternative,
and happily found one: a local credit union, in this case one called
Freedom Credit Union.

Walk into Freedom Credit Union’s office and you immediately sense
that something’s different. The staff members are relaxed. There’s a
friendly play area full of toys for little kids. There are also
lavatories right off the lobby (when is the last time you saw a bank
that had rest rooms for its customers?).

Signing up for several accounts, my wife and I were told that we
could have savings/checking accounts which, with one account number,
allowed us to instantly transfer money within the account from one
classification—savings, which carries a higher interest rate—to free
and interest-paying checking, in order to cover payments, while
specifying that any auto-deposits go directly into savings to earn the
higher interest rate. Overdraft protection from other accounts was free
(versus $15 per covered transaction at my bank). We were provided with
large boxes of checks for our accounts at no charge, too.

We were also issued debit cards, and told that they would be free
at any credit union ATM in the country—not just Freedom’s ATMs, but any
credit union’s ATM. (Many credit unions also refund any charges if you
use a bank ATM and get socked with a charge.)

We didn’t have to be part of any particular organization to join
Freedom Credit Union. Like many credit unions, membership (and when you
join a credit union, you become a part owner) is open to all. And our
deposits are insured, as at a bank, for up to $250,000 per account, by
the National Credit Union Agency, a government body.

Then we asked about getting a credit line. Here we got a
particularly pleasant surprise, because of what our bank has been
doing, and because of what I’ve been reading about how banks are
pulling back on lending, even refusing to allow people to refinance
mortgages at current lower rates, and generally being grudging about
making loans. Apparently not so at credit unions. The loan office at
Freedom Credit Union sent out an appraiser to look at our house within
days of receiving our initial loan application, and has already called
twice to ask if I was having any problem filling out the full
application.

President Obama recently had to call bankers to the White House to
plead with them to start lending (unsuccessfully, it appears), but
here’s my credit union begging me to finish filling out my loan
application, and this for a loan that will be at a rate more than 1%
lower than what my bank was offering!

No wonder the banks have been trying, ever since President Franklin
Roosevelt signed into law the Credit Union Act of 1934, to crush credit
unions, claiming that their tax exempt status (credit unions are all
non-for-profit institutions) gives them an “unfair” advantage. Happily,
so far they’ve failed in this unrelenting effort. Meanwhile, it’s not
really the tax break that explains why banks had to be bailed out, like
savings & loan institutions before them, while credit unions have
never been put in such a situation: Credit unions never got caught up
in the sub-prime scandal, or got involved in trading in CDOs.
Furthermore, as membership institutions, even in hard times they have
tended to put their members first. Here is what a report by CUNA
advised its member credit unions at the onset of the financial crisis:
“Credit unions should not find it necessary to penalize members with
higher loan rates, more and higher fees, lower dividend rates, service
cutbacks or layoffs just to keep net income from falling for a year or
two.” Try to find a bank or bank organization urging the same kind of
action on behalf of bank customers. Instead, they’ve famously been
jacking loan rates, raising fees and inventing new ones, and cutting
service.

No wonder 90 million Americans are already using credit unions. At a
time when the interest rate on a 30-year mortgage at a typical bank is
5.58%, it’s 5.44% at credit unions. At a time that bank interest on
savings accounts is averaging .44%, it’s .68% at credit unions. At a
time that bank CDs are paying an average of .62%, credit unions are
paying 1.22%, or almost double. And at a time used car loans at a bank
cost 7.5%, credit unions are charging 5.72%. Credit card interest is
generally about 1% lower, too, with no fees, and most credit unions
don’t hit you with a penalty for just one late payment on a card
balance (compare that to bank credit cards which can charge late
payment fees of $25-50, plus finance charges on the overdue balance,
and often will also substantially jack your future interest rate on
balances to usurious levels). Clearly, the number of credit union
members should be a lot higher than it is, especially these days, but I
guess it’s hard for credit unions to compete with the advertising
budgets of the banks. Either that or Americans are just financial
masochists.

My advice, though, is to stop grumbling about your bank, and about
all those obscene fees, charges and the bad service you get, and just
do a little research and switch to a local credit union. It’s not just
that you’ll save money, be happier (and be able to relieve yourself if
the need arises while you’re doing your financial business), but in a
small way, you’ll be doing your part to stick it to the banks.
_________________

DAVE LINDORFF is a Philadelphia-area journalist. His latest book
is “The Case for Impeachment” (St. Martin’s Press, 2006). His work is
available at www.thiscantbehappening.net