2011 Credit Union Checking Study
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Banking at credit unions, community banks

2011 Credit Union Checking Study » Banking at credit unions, community banks

Are you fed up with your bank?

You're not alone.

The Move Your Money movement launched in late December 2009 and is urging bank customers angered by the reckless lending practices of too-big-too-fail national banks to move their money to a community bank or credit union.

Free checking at credit unions

And according to community banks and credit unions, plenty of folks already had been making that move over the past year. Membership at credit unions grew by 2 percent in 2009, according to the Madison, Wis.-based Credit Union National Association.

In addition, 55 percent of community banks have seen an increase in deposit accounts from new customers, according to a February 2009 survey from the Washington, D.C-based Independent Community Bankers of America.

Ready to leave that big bank and move your money to a community bank or credit union? Here's a closer look at the pros and cons of such a move.

Good rates

Do your banking at a community bank or credit union and there's a good chance you'll land better interest rates on everything from credit cards and saving accounts to money markets and certificates of deposit. For example, a study by the Pew Charitable Trusts in July 2009 found credit card rates at the 12 largest banks of 12.24 percent to 17.99 percent. At the 12 largest credit unions, the rates were 9.9 percent to 13.75 percent.

Smaller banks use rate specials on deposit accounts to attract new customers and new deposits, says Reuben Clarson, an executive vice president at Atlanta-based Speer & Associates, a financial services consulting firm.

And credit unions, which are member-owned nonprofits, pass surplus profits back to members in the form of competitive interest rates, dividends and low fees, says credit union association spokesman Patrick Keefe.

Another nice thing about banking with a federal credit union is that loan interest rates, including credit cards, are capped at 18 percent by law.

Not so at national banks. "Big banks have no cap -- zero -- and have in some cases charged more than 30 percent interest on some loans and on credit cards as penalties," says Ruth Susswein, deputy director of Consumer Action, a San Francisco-based consumer education and advocacy organization.

Lower fees

Another advantage of banking with smaller banks or credit unions is they tend to charge lower fees.

A November 2009 study by the Filene Research Institute in Madison, Wis., which conducts research on credit unions, shows that the average annual cost of fees on bank checking accounts is more than twice as high as the annual cost of fees on credit union accounts.

The study found that banks charge fees of $183.14 per year or $15 a month, while credit unions charge fees of $71.47 per year or $6 a month.

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