The new frugality is playing out in campaigns like "Move Your Money," aimed at persuading consumers to close out their accounts at big banks and move their business to community-based financial institutions like credit unions.
Credit unions are seeing their fastest growth since 2003. Consumers are much more willing to switch banks than they were before the financial crisis, according to a recent survey by market research firm J.D. Power & Associates. Two-thirds of the big-bank customers surveyed said they would consider jumping to a smaller institution.
The country's 8,000 credit unions are, in fact, rapidly expanding their market share. The Credit Union National Association (CUNA) reports that more than 1.2 million Americans joined a credit union in 2009. Credit unions now have nearly 10 percent of the household savings in the country, their biggest share of the market ever.
A recent Zogby Interactive survey found that bankers are now less popular than politicians. But there is more to the growth in credit union market share than the mere fact that they're not banks. Credit unions are attractive to new frugality consumers for at least three reasons - savings, service and community.
Credit unions improve their members' financial lives through actual cost savings. Because of their not-for-profit, cooperative structures, credit unions are exempted from most state and federal taxes. This allows credit unions to offer their members lower loan rates, higher savings rates and fewer service fees than most banks.
Most credit unions still offer free checking, and their penalties for overdrawing those accounts tend to be lower. The majority of credit unions have no balance requirement on their checking accounts and allow unlimited monthly transactions, feeless debit card transactions and no minimum opening balance on their free checking accounts.
Credit union issued credit cards generally do have annual fees or charge punitive interest rates for a single late payment. And, according to a study by Pew Charitable Trusts, interest rates on credit union credit cards are 20 percent lower than bank cards.
Thanks to these reduced fees and better interest rates, CUNA reported that in 2009 consumers saved $7.3 billion by doing business at credit unions rather than banks. Credit union deposits are insured for at least $250,000 per account by the National Credit Union Administration.
Because credit unions are owned by its members and operated by volunteer boards, credit unions are committed to helping their members' financial health. Credit unions offer a wide range of traditional personal finance tools like checking and savings accounts and loans, as well as state-of-the-art convenience and access services such as online, wireless and mobile banking. And many provide small-business banking and investment advisory services.
Through membership organizations like CO-OP Financial Services, a credit union-owned provider of technology and services, credit union members can access their accounts via 28,000 surcharge-free ATMs - 9,000 of which take deposits. That's more than any national bank. In addition, through CO-OP Shared Branching, 1,650 credit unions around the country give their members access to more than 4,000 branch locations where they can perform virtually any transaction they would do at their own credit union's main office. This gives credit unions the fourth largest branch network in the country, trailing only three major banks.
Many consumers today want to put their money in an organization that is part of their community, connected in the same way they are. Because credit unions are owned by the people who use them, they have a high stake in preserving the communities in which they exist.
By law, credit unions must limit their membership to people who share a particular common bond, and today about one-quarter of credit unions define that shared bond geographically, so anyone who lives in a community may become a member. Almost every American is eligible to join at least one credit union.
And while big banks slashed lending in 2009, credit unions actually made more loans, particularly to small businesses. As of June 30, 2009, credit unions reported a balance of $28.1 billion in member business loans, up $3.5 billion, or 14.4 percent, from the year before, according to the research firm Callahan & Associates. In this way, credit unions further community development.
Frugality offers the opportunity to simplify one's life. Credit unions are one way for battered consumers to find some relief. As the saying goes, "It's not how much we make, but how much we save that makes the difference between being rich and living rich."
About CO-OP Financial Services
Based in Rancho Cucamonga, Calif., CO-OP Financial Services is the industry leader in access and convenience products for credit unions. Nearing 30 years of credit union service, CO-OP connects credit union members to their accounts through network services, payment processing, e-commerce, CO-OP Shared Branching and call center services. With a total of 3,000 credit union members, 30 million cardholders, 28,000 surcharge-free ATMs, 4,000 shared branch locations and 160 million-plus monthly transactions, CO-OP Financial Services is the nation's largest credit union service organization, offering the tools, counsel and leadership to help credit unions prosper. To learn more, visit www.co-opfs.org. Follow CO-OP on Twitter at:http://twitter.com/COOPFS and keep up with industry issues via the CO-OP Insight Vault blog at:http://co-opinsightvault.com.