The decision to open a bank account is, essentially, the decision to lend a bank your money. They pay you a small interest rate—just as you pay an interest rate on your auto, home mortgage or student loans—and you lend to them because you believe that they will pay you back. Interest rates on bank accounts these days are nearly zero, and there is the added twist of being able to demand repayment anytime you like (ATM withdrawals and debit card purchases are exactly this), but the concept holds: Banks need your cash to do business, and you lend them that cash by opening an account.
If you disagree with the business practices of big, for-profit banks, take your money elsewhere. After all, it’s not you who needs the bank—the bank needs you. And you know who else needs you? Local, non-profit credit unions.
Credit unions, also known as community banks, are small by definition: In order to be recognized as a credit union by the Federal Deposit Insurance Corporation, a bank must have less than $1 billion in assets. (The average U.S. credit union in 2008 had $115 million in assets, according to the Credit Union National Association.)
They’re also member-owned: Every person who banks with a credit union, no matter what their account balance, has an equal say in the bank’s business and the election of the bank’s volunteer board of directors. This often translates to a credit union’s reinvestment in the community where it operates, and probably explains the low-interest bike loans offered by the Unitus and Northwest Resource Federal credit unions here in Portland.
According to data released by the National Credit Union Administration in June, the average interest rate offered for a 5-year, $10,000 CD at a U.S. credit union is 2.09 percent, compared to the average 1.78 percent rate offered by a for-profit bank, a difference of $167.35 over the life of the CD. Likewise, NCUA found that a credit union offers, on average, a credit card interest rate that is 1.53 percent lower than the rate offered by its for-profit competitor.
It is true that credit unions do charge some of the same fees as the big banks, such as overdraft fees for debit accounts. But, credit unions often charge less. While an overdraft fee at Wells Fargo is currently $35, the Oregonians Credit Union charges just $3 per overdraft for the first three offenses, and then increases its charge to $10 per offense.
Eligibility for an account at a credit union is based on several factors, including residency in a particular community. Most Portland addresses qualify you for membership at several credit unions, and residence in a suburb does not mean you’re ineligible—Unitus Community Credit Union, for example, extends membership privileges to residents of Multnomah, Washington, Clackamas, Marion, Polk, Yamhill and Clark counties.
There’s no discounting the inconvenience of closing and opening accounts. It is a chore. But it’s important not to let convenience get the best of you. Make a real choice about where you bank, instead of allowing years of habit to make the decision for you.
You have the power to decide who and what your money supports, so take the time to use it.