The Great Recession soured millions of people’s relationships with traditional banks, driving many to entrust their money with credit unions instead. Along with incessant media coverage of their questionable dealings, banks at the time had to contend with consumer outrage about hidden fees and supersized overdraft penalties. As a result, credit unions appeared to be safe and sensible money managers compared to their colossal, unscrupulous counterparts on Wall Street. Plus, credit unions offered perks like free checking, friendly staff, and financial services not available at many of the nation’s troubled institutions.
Nearly five years on, however, credit unions are beginning to behave more and more like traditional banks. In 2010 78 percent of credit unions offered free checking. Today that number stands at 72 percent and dropping. The change can be partly blamed on a similar drop in credit unions themselves. 105 of the nation’s 7,000 credit unions have either closed or merged within other larger organizations. However, many of the ways credit unions have changed can be attributed to the same hardships that have rocked the rest of the banking industry. Low interest rates, higher instances of loan delinquencies, and a generally slow economy have caused credit unions to go searching for revenue in many of the same places as their larger rivals.
For instance, while some consumers might appreciate free checking, it’s not exactly relevant to today’s debit card wielding ATM patron. In fact, most credit unions don’t offer established ATMs to their customers, forcing them to incur withdrawal fees from “foreign” machines owned by other banks. Furthermore, credit unions are also stealthily raising the few fees they do exact on customers, such as for overdrafts. Perhaps most telling, though, is the fact that 28 percent of credit unions now charge a monthly service fee in order to retain membership. Only time will tell if credit unions can keep their courteous, customer-friendly edge even as their other advantages begin to dwindle.
Questions:
- What’s the best advice to follow when selecting a financial institution?
- What must credit unions do to keep customer’s support and grow?
Source: Ismat Sarah Mangla, “Credit Unions’ Homey Image Starts to Fray,” CNN Money, April 8, 2013. Photo by 1-5 Design and Manufacture.