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.