Free Checking Is Great, But Don’t Forget Quality Service

Simon Zhen

By , Staff Writer
Posted on Thu Aug 23, 2012, Last Updated on Thu Aug 23, 2012

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Today’s rising popularity of credit unions can be attributed to the consumer-driven movement revolving around Bank Transfer Day in November of last year. Hundreds of thousands of bank customers who were sick of fees switched to credit unions — a free checking account was often the reward for those who made the move. Free checking is a wonderful thing indeed. But is it worth it if the cost is poor service?

A checking account is likely to be the hub of a consumer’s financial life — it’s where the paycheck goes and how bills get paid. In 2009, a free checking account was common at the nation’s biggest banks. Then, in 2010, new financial regulations threatened the revenue of larger banks, which led to higher fees and the widespread elimination of free checking. Bank Transfer Day helped push frustrated consumers to credit unions, where free checking is still available.

According to a recent study by Bankrate, 72 percent of the America’s largest credit unions offer a free checking accounts with no strings attached, compared to 45 percent of banks.

In terms of fees, a credit union may be the better choice. The quality of service at credit unions versus banks, on the other hand, is up for debate. From financial advice to technology, consumers have come to expect more from their financial institutions. To some former bank customers, the credit-union experience may not fulfill their needs.

Mobile payments, for example, is leading the way in financial innovation. Notable projects such as Google Wallet and Isis Mobile Wallet have partnerships with major banks, card-issuers and financial companies — not credit unions.

Another survey, by independent research firm Aite Group, found that large banks scored better ratings for helping consumers with financial management. For instance, 30 percent of large-bank customers said their banks performed “very well” with categorizing their spending versus 18 percent of credit-union members. When it comes to creating budgets, large banks also scored higher by winning over 28 percent of its customers compared to 9 percent of members at credit unions.

A solution in tech

Despite the apparent shortcomings, credit unions are making the effort to bolster their level of service — primarily through technology.

For instance, more credit unions are offering a highly-demanded feature known as mobile check deposit, which lets users make paper-check deposits with a smartphone. Currently, seven of the top 10 banks have offer this piece of technology compared to half of the top 10 credit unions.

More than 220 credit unions currently offer Intuit FinanceWorks, a tool that lets members aggregate all their financial accounts in one place for easy money management.

Sometimes, credit unions are more likely to test newer technologies. Sussex County Federal Credit Union, based in Seaford, Del., is the first U.S. institution to install virtual-teller ATMs, which offers live teller support outside of regular business hours.

Through technology, credit unions are showing how they can provide better service. Combine that with lower fees and better interest rates and credit unions can contend for consumers on a level playing field with big banks.

Some consumers may find that big-bank service is worth the fees, while others may not. In the end, the power of choice lies with consumers, who can try out a credit union and a big bank to decide which one is more appropriate for them.

 

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  • http://www.facebook.com/profile.php?id=100004045477573 Whit Leung

    Most big banks have “fees” to maintain a checking account unless certain criteria is met. Either x amount maintained daily or, direct deposit of $x which can be anywhere from a few hundred to at most a thousand I’ve seen.. Let me ask this, shouldn’t Americans be fighting for a higher salary or bigger paycheck so something like this, the requirement big banks have versus credit unions, instead of focusing on the “fee”?

    If you don’t at least get paid 1000 let’s say, or more a month, how are you suppose to survive? Short term you can, and maybe if you stretch a dime out of every penny you might even make it towards a quarter of what would be a nice retirement–

    Not to derail too much but also, keep in mind that if you don’t maintain a certain amount of money in your account it cannot legally be used or considered when banks in turn use “your money” to lend. If you’re living paycheck to paycheck and the bank knows this because your average daily balance is super low, how can they “use” this money to lend. So where do they make the money, in fees of course

    You don’t expect storage facilities to keep your excess stuff for free, would you expect a bank who is for profit to do so? When they have shareholders, employees and vendors to pay?

    • http://www.mybanktracker.com Alex Matjanec

      Thanks for the comment Whit. Your points are 100% accurate and actually are the main reason we see products such as the Prepaid debit card growing at 35% YOY. The goal of our post was to highlight that while some consumer are quick to jump to accounts such as Free Checking or even Rewards Checking with their hight Interest rates, you really need to look at your banking habits.