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Move Your Money to Community Banks

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14 pointsrobg22 comments

Or go the next logical step and move your money to a credit union, where the dollars in your account are shares in the union. Unlike banks, the average credit union isn't built to screw you in every way they think they can get away with.

Small examples:

* When I first opened my accounts there was a (required by law, afaik) probationary period where checks took ages to clear. Since then, all my checks clear the moment I deposit them through the drive through. Typical checks are in the $1000-$6000 range, out of state. (My parents use the same credit union. My mom thinks she remembers a check deposit taking one business day--once.)

* Transfers from PayPal seem to clear a day faster than they did with my bank.

* Overdraft protection from my savings account is free and automatic.

Being a part of a credit union is a different experience from depositing money at a bank. It's similar to the way you might feel different even about some big, "faceless" corporation if it was one you'd chosen to make a significant (to you, if not them) investment in.

1. The bank took longer to clear the check because it would have to send the check back to the bank where the check was first drawn, this is what we call float.. your credit union probably had a system in place that gives you a temporary "credit" until that check officially clears.. this is all pretty much null and void after 9/11, most banks can just send an image of the check eliminating your float.

2. you're two other points are mute really, you can find banks with similar advantageous pricing structures; the advantages of credit unions are they don't have to pay the outrageous taxes federal banks are paying, this helps keep their lending rates down, the important thing to remember though is a credit union is not an FDIC insured thing, if it goes under you're screwed. the nice thing is, its hard for a community driven thing to go under, but if all the lenders start short selling good luck.

Wikipedia (yeah, not the best source: http://en.wikipedia.org/wiki/Credit_unions_in_the_United_Sta...) claims that all federally chartered and nearly all (95%?) state chartered credit unions are insured to $250k through NCUSIF. Sounds like a pretty safe bet to me. I'm not so sure you're screwed if they go under, although maybe someone can point on an example of that actually occurring?

1. I can't tell if you're saying that most banks now also credit my account instantly (none of the three I've used post-9/11 did), or if you're saying that getting access to my deposits instantly isn't really an advantage because... ?

2. Credit unions are insured by the NCUA, a federal agency backed by the full faith and credit of the US Government just as the FDIC, and in the same amounts with the same rules about accounts.

this will vary with different institutions.. If you deposit money into an account you will have access to it instantly with most banks, unless they don't do in office processing or have some sort of memo credit system in place. I can't think of many that don't. Credit unions aren't available to everyone tho and are still limited in lending as opposed to any fdic bank.

Then why aren't deposits to a credit union more popular?

Probably for the same reason that McDonalds is still does a ton more business than the small local mom and pop burger places. People feel comfortable with the big chain that they know even if it's not as good.

Yes, there are many advantages to a community bank or credit union. However, there is one problem that outweighs all those benefits.

No ATMS!

If you get an account at a huge bank like Chase, Bank of America, or HSBC, there are branches and ATMs everywhere you go. A community bank is fine if you're the kind of person who stays in one place and never moves. If you travel a lot, a local bank is useless.

What would be nice is if we could get the benefits of a local bank, but have branches all over the country/world.

there's a comment on metafilter addresing this - http://www.metafilter.com/87921/If-Potter-gets-a-hold-of-thi...

Lots of these banks are part of an ATM consortium called SUM, and so you don't really lose out on the main benefit of the big banks. If we can find a SUM ATM (they're everywhere) then there's no fee for using it.

I don't know about you, but my community bank offers automatic refunds for ATM fees from third-party ATMs.

http://www.moneypass.com/

Small banks fail too, they won't make the national news but they definitely do.

This is an interesting list of failed banks:

http://www.fdic.gov/bank/individual/failed/banklist.html

Especially if you look at the years and the number of failures in those years.

2009 definitely does not look good, more than 100 in one year.

No doubt. But isn't a big part of that in 2009 because local banks were encouraged to take bigger risks than they normally would have? I mean, if they didn't have mortgages to bundle for Wall Street, would their more conservative policies have helped them to survive?

Possibly, but not certainly. Small banks fail for a variety of reasons, not in the least because of their inability to absorb a single larger loss.

Traditionally the 'credit union' is the bank form with the lowest rate of failure.

It was everybody's greed, not just the banks.

If I despise something about human societies, it is their tendency for scapegoating...

Our political tradition sets great store by the generalized symbol of evil. This is the wrongdoer whose wrongdoing will be taken by the public to be the secret propensity of a whole community or class. We search avidly for such people, not so much because we wish to see them exposed and punished as individuals, but because we cherish the resulting political discomfort of their friends. To uncover an evil man among the friends of one's foes had long been a recognized method of advancing one's political fortunes. However, in recent times the technique has been greatly improved and refined by the added firmness with which the evil of the evildoer is now attributed to friends, acquaintances, and all who share his way of life.

--John Kenneth Galbraith (concerning vilification of Wall Street following the '29 crash)

It's not a human societies thing, it's a human thing.

I would echo a little and say drive past the banks and begin a relationship with a credit union.

And if you can join the USAA orr NFCU, then definitely do. (And you may be eligible, I was.)

There was a time when lending decisions were made by a loan office with some thoughtfulness. You won't get that at any large bank now. Now it's a computer that parses your AGI and Fico and doesn't know you, your values, or your creditworthiness. (And Fico is ripe with edge cases, it's certainly not the whole story on credit worthiness).

But at a CU, you'll be able to sit at a desk with an underwriter. Yes, your stats will matter, but they will take into account the whole picture of a borrower.

Where are the hard facts to show the rate of failure of "local" banks vs national banks?

Some of the banks listed (for me) were part of large international conglomerates? That's better?

Also, having worked for large banks (one of the largest) and then in software sold to small "local" community banks and credit unions, I know that you are sacrificing online features with the the little banks. Most of them can't have the online convenience features that the large ones do.

And don't think that the "local" banks are any less "greedy" or "evil" than large banks. The reason this little banks stay in business is that they are incredibly profitable. They charge fees just as high (overdraft fees keep them in business) as the larger banks but don't have the regulators up their butt like the larger banks.

Did you ever wonder why banks offered free checking? It ain't to upsell you into car loans. It's in the hopes that you habitually overdraft and then pay the enormous fees.

There's a reason the big banks print everything in multiple languages. They love immigrant customers who are not financially literate. Stand in a bank in an immigrant neighborhood sometime and listen to the tellers explain to people why they now owe $200 in overdraft fees and their account is empty.

Having said that, credit unions are your best bet. Again if you can sacrifice a lot of convenience features you get for "free" with the larger banks.

Disclosure: I still bank with a large evil bank. Too much hassle to switch for too little benefit (if fact negative benefit because I lose features).

local banks have to be more scrupulous with whom they lend too, this is why they're often more successful and a recommended choice right now.

not everyone gets a loan if your bank only generates 400 million in combined assets and revenue.

From the 'Story' page on the site:

'The filmmaker at the table reminded the others of the story told in the classic film It’s A Wonderful Life — a tale about a small banker, played by Jimmy Stewart, who almost gets crushed by a big banker. In the end, though, the community rallies around the small bank and helps save it.'

Or looking at it another way, through the incompetencies of staff the bank loses a fortune and has to be bailed out by the public. Is there a modern day remake in the offing?!

My family uses a truly faceless bank -- President's Choice Financial. There are no physical offices for this bank other than the kiosks inside of Loblaw's grocery stores. If you need to pick up money order or something similar, you go to a CIBC.

However, I do not see the benefit of a credit union or community bank. My current bank offers:

  - No monthly or annual fee.
  - Online banking.
  - Free cheques.
  - Unlimited debit transactions.
  - Reward points for purchasing groceries with our debit card.
  - Instant availability of deposited cheques, up to several thousand dollars.

What does a credit union or community bank have to offer to me, considering that I have no need for a friendly personality or face to talk to? I am the type of guy who prefers the self-checkout lines.

(Sorry for the edits, poor formatting)

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