The notices started coming in October. First one credit card was raising its rate, then another. Looking for a way around a 19.99% interest rate, I contacted a large local credit union and was immediately offered a credit card at 6.99% interest.
Even more exciting, a credit union representative uttered those four little words I'd been longing to hear: no balance transfer fee.
That's all it took for me to switch. Others point to better customer service, higher interest rates on checking and savings accounts or the "unfair or deceptive" practices used by 100% of bank credit cards -- as delineated in an October 2009 Pew Charitable Trust study (.pdf file) -- as reasons they've kicked big banks to the curb.
Fine-print fiascoMike Phinney, a 44-year-old technical director from Baltimore, says he switched his checking, savings and credit card over to a credit union five years ago, after his bank changed ownership -- and the language of his banking contract -- allowing them to take his money.
"I had these two household accounts with about $600 each, money I was holding on to for renovations," he says. "But then my bank changed the language of the contract, saying that if an account doesn't remain active, within 30 days you start to accrue penalties."
He argued with two managers, who finally agreed to remove the balance due. But they kept the $1,200. "That's when I pulled all my money out of the bank and switched over to a credit union," Phinney says.
There were other reasons, too. Phinney's bank had refused to budge from the 17% interest it charged for his credit card (the credit union offered him 6%), and the customer service at his bank, he says, was getting worse.
"They couldn't make the simplest decisions without calling the head office," he says. "It was becoming very impersonal. At the credit union, though, it feels like the good, old-fashioned customer service that people long for. They're friendly; they know you by name. It's like the old family bank."
Credit unions are member-owned, while banks are run for the benefit of shareholders.
Prompted by penalty feesPenalty fees also drove Liz Washer, a 32-year-old communications director from Amherst, Mass., to switch her checking and savings accounts to a credit union after being with the same bank for more than eight years.
"I watched my checking account very closely, but in eight years, you're going to make a mistake here and there," Washer says. "I finally goofed and paid a bill before my paycheck cleared. The account was overdrawn for about a day, but a bunch of little ATM charges and bills went through on that day."
She knew it was her fault, but the fees felt punitive because she'd been a customer for so long. "So I called customer service," she says, "and was handed off to a very strident manager who smugly reminded me that the same thing had happened before. That's when I told her I planned to move to a credit union."
Washer says she's found the credit-union policy regarding overdrafts much more accommodating.
"They charge a fee, but you have to be a repeat offender," she says. "And they let you know quickly if your account goes into the red. My bank would send a letter, which is a great way to guarantee you won't know for a couple of days. It's like they're hoping you don't notice too quickly so they can charge you every time something goes through."
Another plus: Washer's credit union doesn't charge a fee every time she uses an ATM.
"The bank ATM fees were annoying," she says. "I was usually being charged around $4 in fees to withdraw cash. At the credit union, they reimburse any ATM fees."