Bank Blowback: Should you transfer your accounts now?

By Lee Bellinger / November 12, 2013

People are obviously quite mad at banks, and it’s not just the Occupy Wall Street folks.
It’s quite understandable, since Wall Street banks are the epicenter of elite crony capitalism in America. (The Wall Street protest outbreak seems rooted in a more statist agenda, however.)
Perhaps the release of so much pent up anti-Wall Street fury is the result of people no longer blithely ignoring the corruption. After all, it has only been recently that those crooked partnerships finally spilled over into the real economy and helped to destroy a significant number of jobs and potential jobs.
Personally, my way of protesting Big Government’s unholy alliance with Big Banks is to switch my cash to a more reliable form: gold and silver. If you want to protest these corrupt political elites and their money games, then this is a great way to go. (Not to mention it protects your wealth better than having blind faith in the money-printing crowd.)
But other forms of financial protest are on display too. In early November, tens of thousands of depositors banded together, flexed their free market muscle, and sent a loud message to Big Banks… they took part in “Bank Transfer Day.” On this day, dissatisfied depositors transferred their accounts from big banks to community banks and credit unions in droves.
Financial Protests against Corrupt Banks Help Credit Unions
Talk about a growing national instinct toward greater self-reliance – now these folks have their money in member-controlled, not-for-profit institutions instead of in mega-corporations that nickel and dime depositors at every opportunity. The Credit Union National Association (CUNA) reports that over 40,000 people joined on Bank Transfer Day, bringing $80 million in deposits with them. What’s more, credit unions issued nearly $90 million in new loans.
If you plan to transfer your bank account because of bad service, don’t like getting hit by fees, or want to teach big-bank cronies a lesson, there are a few things to watch out for so everything goes smoothly…
What Are the Benefits of Joining a Credit Union?
Credit unions offer you a long list of advantages over big commercial banks. Bank Transfer Day wasn’t only a move to punish publicly traded banks, it’s a clear sign the free market is looking for a better deal, a better service, at a better price.
  • Credit unions carry lower maintenance fees and higher interest rates than big national banks.
  • The Credit Power Index measures the spread between interest charged to borrowers and interest paid to depositors; the higher the index, the worse for consumers. At the end of July, the index was five and a half points lower for credit unions than for banks, assuring a significant payoff for depositors who make the switch.
  • Credit unions are nonprofit. This means that instead of paying out profits to shareholders, the benefits instead flow to their members – the depositors. Publicly traded big banks, which tend to serve hedge funds and pension-fund shareholders. And as the Credit Power Index demonstrates, the banks do so at the expense of the depositor.
  • “Credit unions beat banks on deposit rates across the board,” confirms Mainstreet.com. The average interest rate on the 12-month certificate of deposit at banks was 0.47% at the end of July. The same product at credit unions offers a 0.73% return – more than 55% higher.
  • Over 75% of credit unions offer no-strings-attached free checking. In comparison, only 45% of banks offer the same benefit according to Bankrate.com analyst Greg McBride.
  • Deposits at credit unions are insured up to $250,000, just like commercial banks.
  • National Credit Union Administration (NCUA) spokesman David Small says many of the nation’s credit unions “are in rural areas where there is no other banking option.” In other words, credit unions enable communities to be more self-reliant and healthy.
Banks Have Been Losing Customers to
Credit Unions Long before Bank Transfer Day
Believe it or not, nearly one-third of Americans are members of credit unions. With the negative press on banks, the Fed, bank bailouts, bank failures, and excessive, punitive fees charged by big banks, depositors have been steadily moving to credit unions over the past few years. CUNA CEO Bill Cheney says one million members joined credit unions in 2010, and he expects to see that number easily exceeded in 2011.
According to a report in Mainstreet.com, since September 29, 2011, the day that Bank of America announced its $5 per month debit card fee (now rescinded), credit unions nationwide added nearly 20,000 new members each day. The result is approximately 650,000 new credit union members in just a matter of weeks, according to CUNA.
How to Switch to a Credit Union and Avoid Snafus
Find a Credit Union
  1. Open a new account first, before you close the old one. “If you do it hastily and just close your account, you could run into headaches,” says Paul Golden of the National Endowment for Financial Education. You can ask your friends and family for a recommendation to a nearby credit union (one in three Americans is already a member) or search this site: http://www.findacreditunion.com/
  2. Make your new credit union account your primary account. Update all your automatic bill pays, online banking, direct deposit, and automatic withdraws from your checking accounts such as for your gym, credit card payments, or monthly precious metals accumulation program, with your NEW account information.
  3. Dim the lights on your old account, but don’t close it completely, yet. Cut the ties for all your auto-payments and auto-drafts from your OLD account. You don’t want to send double payments to your gym!
  4. Stabilize. Keep a little money in your old account, just in case. During this stabilizing period you want to make sure there are no floating checks that need to clear or an auto-draft you forgot to cancel. Keeping some money in the old account can help cover these oversights and avoid getting dinged with NSF charges or dealing with bounced checks.
  5. Close it for good. Once your transfer process is stabilized and everything is working smoothly, close your old account quickly (avoid getting charged for low account balance fees). Some banks allow you to easily close your account in person; some require you to do it by mail. Find out the closing process at your old bank and do it.
  6. Shred! Shred all your old bank account information you no longer need, especially blank checks and old debit cards.
Credit unions can be great alternatives to big banks. They are structured as nonprofit, member-owned coops. Many participants feel their individual interests are better respected by credit unions than by their gigantic counterparts. Most credit union members also claim to enjoy higher savings rates and lower borrowing costs than at the big banks, as well as being treated like a valued customer. Is that how you want to be treated, too?
A credit union may well be an option for you if you have been shopping around for a new financial institution to park your money in.