More consumers leaving big banks for credit unions
by Eve Mitchell, Contra Costa Times
Credit unions and community banks in the Bay Area are seeing a spike in new members, sparked in part by general anger with big banks and in part by their now-abandoned plans to charge for using debit cards.
While data for the Bay Area is not yet available, on a national basis credit unions gained an astonishing 650,000 new members in October, 50,000 higher than the number of new members who joined in all of 2010, according to the Credit Union National Association.
In the Bay Area, Patelco Credit Union had about a 70 percent increase in new members signing up in October compared to the two previous months.
"We were averaging about 80 new members per business day in August and September," said Alison Jones, vice president of marketing at Patelco. Through the last week of October, "it’s up to 135 new members per business day."
How many joined in response to Bank Transfer Day, which called for consumers to switch their accounts from big banks to credit unions on or before Saturday, is unclear.
Laurie Miller, 50, of Hayward switched to Patelco on Oct. 29 as a result of Wells Fargo’s now-scrapped plans to charge for debit card use. And while Bank Transfer Day played a role in Miller’s decision, she and her husband were already thinking about leaving Wells Fargo.
"We had been talking about it anyway and it just kind of gave us a little nudge to go ahead and do it," said Miller, who works as a program assistant for the Hayward Unified School District. "I’m kind of hoping everybody still does it, because with all the bailouts with the banks and all the profits they are making, someone has to stick it to them."
Some 36 percent of longtime banking customers surveyed by Intuit (INTU) Financial Services in October said they already have or plan to move their accounts to another financial institution in response to earlier announcements about checking account and debit card fees.
In response to consumers moving their money from big banks to smaller banks, Wells Fargo spokesman Ruben Pulido said: "People have the freedom to move their money from one financial institution to another. … So the issue is why are they moving it."
Before making a switch, customers should talk to their current bank, he said.
"They should look at the services we offer," Pulido said. "We can tell them how we are working to help out (customers) who are going through financial hardships, we’re modifying (home) loans, we’re lending money to small businesses (and) donating to schools and nonprofits."
And while many people are saying they will make the switch, breaking up with a bank is easier said than done. Online banking, bill paying, overdraft protection and direct deposit relationships that help make banking easy for consumers can make it hard to switch banks.
One industry survey by Aspen Analytics found that households who used a bank’s bill pay service were 76 percent less likely to switch banks than those who did not use such a service.
"That’s why there’s a big departure between what people say and what people actually follow through and do," said Greg McBride, senior financial analyst for Bankrate.com. "The more products and services the customer has with the bank the more likely the customer is to stay."
Despite that, Patelco was not alone. Redwood Credit Union gained more than 2,400 new accounts in October, or about double that of September. More than 500 were opened by people who had left Bank of America, up sharply from the 180 new accounts opened in September by former Bank of America customers.
"I really don’t think what’s going on is just the $5 fee. It’s something much bigger than that," said Brett Martinez, president and chief executive officer of Redwood Credit Union.
And Richmond-based Mechanics Bank gained about 800 new customers in October compared to 600 in September. "People are walking in the door (and saying) ‘I’m done with the big banks, I want to bank local,’ " said Rauly Butler, senior vice president of retail banking at Mechanics Bank.
But the big banks have been expanding their own products and services to attract and retain customers. The number of consumers who are banking online to pay bills, check balances and move money between accounts has increased significantly over the past few years. Banks are counting on these relationships.
"It is clear we have a lot of people sticking their heads out of the window and screaming, ‘I’m mad as hell.’ What’s not so clear is how many will then add the second half of that famous statement ‘and I’m not going to take it any more’ " and move their accounts, said Mark Schwanhausser, a senior analyst with Pleasanton-based Javelin Strategy & Research, a financial services industry research firm.
Besides paying bills online, many consumers also have overdraft protection such as a line of credit linked to a checking account, said Jim Bruene, editor of OnlineBankingReport.com.
"That’s a harder thing to change," he said. "That means you have to apply for credit at a new place."
Still, many customers are making the move from the big banks to smaller ones. Miller had online bill pay and direct deposit with Wells Fargo and figured it was worth her time to switch to Patelco.
"I think that sticky accounts like those with bill pay and using online banking … would keep some from (switching). But certainly, it’s not stopping the 70 percent increase in new members we are seeing." said Jones, the executive with Patelco. "People are getting fired up that might ordinarily say, ‘I’ve got bill pay, I’ll stick it out.’ Now they’re saying ‘I can’t stand out on the steps of City Hall, but I can move my bank account.’ "