As news of new and steeper banking fees has swept the nation, so has speculation that there will be a mass exodus to credit unions, which, because of their unique missions, are more likely to hold off on such charges.
So far, the movement of customers from banks to credit unions in Northern Arizona is more of a gentle swell than a tsunami, but it has begun.
“We’re not really seeing a jump in new accounts, but I am seeing a big jump in traffic on our website,” said David Kexel, vice president of marketing at Arizona Central Credit Union’s main branch in Phoenix. “There’s a 180 percent increase in traffic to our checking account pages. It appears people are out there searching.”
It is not easy to switch accounts, what with the strings that we attach to them these days – among them, automatic bill pay and direct deposits. That could be part of the hold up.
“On average, only 17 percent of the population will go through the time and trouble to move their accounts,” said Jennifer Harris, president and CEO of the Coconino Federal Credit Union.
There’s also the fact that Wells Fargo, one of the major national banks that’s experimenting with new monthly debit card swipe fees, has not yet announced plans to roll it out in Arizona. Bank of America’s version of the fee, $5 for even one swipe in a month’s time at a merchant’s cash register, won’t start until after the first of the year.
If escaping checking account fees is the name of the game, credit unions look to be a promising option. Thousands of the nonprofit, member-owned institutions have opened across the country since they were created under the 1934 Federal Credit Union Act. Though most were initially affiliated with labor or religious groups, many these days are open to the public and offer the same services as most banks – aside from commercial lending – with lower fees and typically higher interest rates. It’s a difference in business structure, Harris said.
“I think it goes to the nature of credit unions. Any income that we make from the interest on loans goes back to membership in the form of lower fees, higher savings rates and lower loan rates. A bank is out to make money for its stockholders. Our stockholders are the people who have accounts with the credit unions.“
For larger, national banks like Wells Fargo, Bank of America or Citibank, all of which have made recent headlines with the new debit card fees, the new fees are a way to recoup millions of dollars in losses they face now that a new law restricts the fees they may charge merchants when customers pay with debit cards in their stores. The Dodd-Frank Act, passed in June, lowers those bank-to-merchant fees from 44 to 24 cents.
The way the fees have been working, of that 44 cents, half has gone to the bank that issued the debit card, and half to its credit card company, usually Visa or MasterCard.
Now, banks with more than $10 billion in assets must accept the lower fees, according to the Dodd-Frank Act – but there’s an exemption for smaller institutions. Most credit unions number among those.
Harris says it is actually too soon to tell whether the exemption will translate into a boon or a bust for credit unions. On the surface, credit unions will be able to continue charging the swipe fees to merchants, without any hit to the profits they can offer members.
However, “we could see merchants saying, ‘I won’t take your debit card unless it is from Bank of America because the merchant would pay less to Bank of America,’” she said, in which case, credit unions may not end up as competitive with respect to their lower fees or higher interest rates on savings products.
It seems in more rural Arizona, it’s the principle of the thing that has former bank customers moving to credit unions in “droves” that surpass the state trend, says Kayleen Hagadorn, manager at the Show Low branch of the Arizona Central Credit Union.
“It’s amazing; it really is. It’s the banks. They’re angry. They’re frustrated. They feel like they’re being charged so the banks can profit.”
Even if fallout from the hubbub surrounding larger, for-profit banks does deliver a hit to the monetary advantage of credit unions, Hagadorn believes credit unions offer a timeless advantage.
“Credit unions didn’t get any bailout money,” she pointed out. “That’s another issue. Credit unions have really taken a hit these past few years. The banks got all this money. What are they doing with it?” FBN