 Credit union people and knowledgeable consumers already know it, but a recent piece by a prominent financial columnist has underscored again the advantage of doing business with a credit union rather than a bank.
And in this case, the comparison was in the area of credit cards.
Liz Pulliam Weston, a columnist for MSN Money and an author of several books, recently recommended that her readers opt for credit unions over banks when it comes to credit cards and service.
Wrote Liz: "Everybody knows that banks have jacked up fees on those who mismanage their checking accounts and credit cards.
Charges for late payments and exceeding their credit limits have almost tripled in the past decade. Getting less attention are the fees banks are imposing on their more responsible customers who are just trying to access and manage their accounts."
The examples she cites are numerous, and consumers have felt their pinch:
- ATM Fees Rising — On average, your bank charges you 25 percent more than it did six years ago for using another bank's ATM. And the "foreign" bank adds a surcharge that's 40 percent higher than it was in 1999.
- Cash Advance Fees Up Sharply — Getting cash from your credit card has long been expensive, but the tab has risen sharply in recent years. A decade ago, most credit card issuers imposed a 2 percent fee with a $2 minimum fee and a $10 maximum fee on cash advances. Today, that fee is 3 percent with minimums ranging from $5 to $15 — and no maximums.
- "Courtesy" Services are Disappearing — Fees to talk to bank tellers, in person or on the phone, are now standard for many low-balance accounts.
- Miscellaneous Fees are Rising — Balance-transfer fees on credit cards of 3 percent to 4 percent are now commonplace, as are 3 percent foreign exchange fees when you use your credit card overseas. Account research can get pricey as well — banks and lenders may charge $5 for a copy of an old check or $10 for an archived statement.
Whether hidden or not, all these fees have helped many banks turn in record profits in recent years. Credit card fees alone jumped 18 percent last year to a staggering $24 billion.
Avoiding fees can be difficult, Liz pointed out, particularly for consumers who don't have much money or a clear understanding of what penalties they might face.
Consumer advocates say fees are one of the factors scaring low-income folks out of the mainstream banking and credit systems.
Liz advised her readers: "You don't have to take it! Fortunately, there are banking alternatives for consumers looking for better deals." The solution, she said, is to look into credit unions. Member-owned credit unions focus on community development that seems to be in a time warp — in a good way. Their fees and terms are often much more consumer-friendly than the typical bank.
And you needn't take any single columnist's word for that. A survey by the Woodstock Institute found that:.
- Seven of 10 large national credit unions didn't have cash-advance fees on their credit cards.
- The three credit unions that did charge cash-advance fees levied an average of 1.83 percent, compared to 3 percent charged by all 10 of the nation's largest banks.
- Only one of the 10 credit unions charged a higher interest rate for cash advances than for purchases, while all 10 of the major banks did.
- The penalty interest rate at credit unions stood at 19.8 percent, compared to 25.4 percent for banks.
- Credit unions charge an average late fee of $25, compared with $39 for banks; an average overlimit fee of $17.90 compared to $33.60 for banks; and an average balance transfer fee of 2 percent compared to 3 percent for banks.
As Liz concludes, "Look for better deals." And as anyone can see, the better deal is once again at a credit union.
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Regulatory Affairs
