If you have been using the services of a bank for a few years, it's likely that you, like everyone else, have a nightmarish tale of the financial ineptitude displayed by your institution. Funds lost. Cranky tellers. Intimidating applications and bureaucracy. My favourite is the deposited cheque that's put on hold for days before you can squeeze out its cashy goodness.
We all have these stories, right? Wrong. I have been banking at a Credit Union since I was knee-high to an accounts payable ledger, and I have nothing but praise for the place. Not just contented satisfaction. Praise. I love my Credit Union. It might even be fair to say that my Credit Union loves me right back. Does your bank love you?
Why doesn't everybody belong to a Credit Union? I think it's a matter of education: most people have no understanding of what a Credit Union is, and the people who have just a little understanding tend to feel that it's some kind of poor Communist cousin of the modern, Western bank. If you want a nice comparison to Communism, take a good look at the line up the next time you're trying to get some service at your bank. Would you like a roll of toilet paper with that cancelled cheque request, Comrade?
As it turns out, here in Canada, almost a third of us do business of some kind at a Credit Union. Maybe the other 66% go to banks because they think the big institutions have something that Credit Unions are lacking. To deal with this concern, I considered the most important qualities I look for in a bank, and then examined how my Credit Union stacked up.
Cost of Services
This one blows my mind. It used to work like this: You give a bank your money to play with, and in exchange, they offer you safety, a point of a percentage in interest, and service hours that fly in the face of every other honest business. Then they loan your own money back to you at high rates, and profit from lucrative investment strategies that are only feasible with their large amounts of capital. But at least when you asked for some of your money back, they would give it to you.
Recently, somebody at the bank realized the ridiculousness of this arrangement. "Why just
give the money back," he, probably a he, said, "when we can make them
pay to get it back?" Another man, further down the football-field-sized table, countered, "Why not make them pay to put it back
in, too?" Then there was much rejoicing, and the appropriate animals were sacrificed upon the alter of Baal, back behind the copy machine.
I seem to recall reading a newspaper article (I'm trying to track down the source, let me know if you have it) stating the fees have actually outstripped investments as the main source of income for banks. This means that instead of doing their jobs-- growing your hard-earned money for their own benefit-- they are exploiting their position as keepers of your funds in order to extract more of your money, all for the privilege of having them mismanage it. Want to write a cheque? Sixty cents. Deal with a teller for a transfer? Three dollars. Money order? Ka-ching!
At the same time, automatic teller machines (ATMs) appear, confounding the elderly populace, and freeing the banks to fire chunks of their salary-and-benefits gobbling workforce. ATMs don't need raises or mental health days or cup-a-soups in the kitchen. ATMs don't take maternity leave or smoke breaks or office supplies. ATMs make the customer do the work of processing their own transactions. ATMs are a frickin' goldmine to the banks.
However, as a computer geek, I recognize that setting up and maintaining the ATM infrastructure is expensive. But so are thousands of employees. Which do you suspect costs less? On that basis alone, banks should never,
ever dare to charge users for accessing their funds using an ATM. They should be dispensing sandwiches with your statements. Imagine a little arrow pointing to "Ham & Cheese," and another to "Egg Salad on Rye." Charging customers to enjoy a service that is already saving the banks millions annually is repugnant, but folks, it's right around the corner. Already, CIBC/Amicus-branded "convenience" bank machines, charging a $1.50 fee on top of your regular banking fees, are replacing normal, free-of-charge ATMs at your local 7-Eleven (like mine at Broadway and Oak).
So let's recap: instead of having many tellers servicing your account for free, you are either doing the work yourself, or paying one of a dwindling number of tellers for doing a job that the bank should see as the cost of doing business. I'm not sure what their excuse is, since I recall record-breaking, multi-billion dollar net profits for the big Canadian banks over the last few years.
Now let's look at my fees at
my Credit Union. I pay $4.95 per month for a
SuperMember account, which includes:
- unlimited Interac (direct payment, or debit charges)
- unlimited electronic fund transfers
- free cheque stop payments
- free money orders and certified cheques
- 100 personalized cheques per year
- free bill payment, at the branch, in person, with a teller, no less!
- phone and internet banking
- five free ATM withdrawals at any bank's ATM machines
- and a whole schwack more.
Those ATM withdrawals are worth $6.00 alone, so if you use them, you're already saving money. Personally, I just use my debit card everywhere and rarely have cash on hand. It's like having a free-of-charge teller in my pocket. I'm hoping it's the cute blonde who worked there when I was in university.
Go compare this to whatever your banking charges are. Go on, I dare you. But maybe you don't care about service charges. Maybe you're more interested in...
Financial Advisor/Investment Services
Believe it or not, most Credit Unions have someone on staff, or directly affiliated with the branch, who will act as your financial advisor free of charge. Yes, free. Financial planners make a truck load of dough from your investments anyhow, so charging for the service would just be insulting. Credit Unions realize this. Also, since Credit Unions don't have their own mutual funds, there is no concern of bias in the advice you receive. There is no Richmond Savings Credit Union Global Telecommunications Venture Fund, and no one will pressure you to buy it.
What I never quite understood about getting investment advice from a bank is this: isn't the bank's main business investing? Wouldn't it be easier to just buy the bank's stock and ride its coattails? But hey, that's just me, and I'm not rich.
As for the actual investment services, like online trading and investment management, it's true that Credit Unions don't usually offer stock trading accounts that can be linked to your chequing and savings accounts. If you want to trade online, you can always open an account with a non-bank-affiliated web company, whose sole business is online trading.
So if you really need to move $20,000 from your personal savings account immediately into your trading account so that you can leverage Yen futures, and you
need to have it all at one institution, on one website, Credit Unions may not serve all your financial needs.
Interest Rates
In a quick comparison between my Credit Union and CIBC, just this second, CIBC had the edge by a percentage point or two for closed mortgages. But the thing to remember here is that signing a mortgage is really a kind of financial
purchase, and like other purchases, negotiation is possible.
Have you ever tried to haggle with a Sears clerk on the price of the TV you're going to buy? Not bloody likely. Larger organizations are less keen about giving employees control of the sales margin. But just like the smaller, more personal shops, haggling is far more effective at a Credit Union.
This has to do with attitude: a Credit Union sees itself as a facilitator within a community, whereas a bank is more like... well... just another business. The Credit Union wants to make some profit from the deal, but with fewer "customers" (they're actually "members," but I'll get into that later), they're more likely to bend in order to keep you from going elsewhere. Furthermore, the Credit Union also wants to help you buy a home. Banks, on the other hand, have no shortage of people humbling asking for help buying a home, and with no interest in improving the community, there is no dilemma in either making that help very expensive, or refusing it altogether.
I personally have never had a problem getting my Credit Union to match the best rate I could get from another institution. But maybe I get special treatment because we love each other so much.
Yeah, that's probably it.
"Global Reach"
This one cracks me up. It seems that most banks-- most
Canadian banks, banks regulated and protected by the Canadian government-- think that competing in some kind of global banking market is the best way to service Canadian customers. I'm not sure exactly who those customers are. It must be that five percent that has fifty percent of the wealth, or whatever the statistic is.
The only reach I'm interested in is being able to reach my money when I'm not in the same city as my branch. Which I have always been able to do: Rome, Amsterdam, Las Vegas, Melbourne, Kuala Lumpur, Washington DC, Tokyo. No problems.
In fact, I currently live in Vancouver, BC, while my Credit Union is in Hamilton, ON, over 2000 km away. I have never opened another account, and have never needed to. The only mild annoyance is depositing cheques; to help with that, my Credit Union gave me a fistful of postage-paid pre-addressed envelopes, and they deposit my cheques for me, free of charge. Which leads me to my next point...
Going the Extra Mile
Any bank should be able to consistently serve you in a way that, at the very least, does not ruin your mood for the day. But how often does someone there actually serve you in a way that makes you feel like they
cared about you?
I can't promise that all Credit Unions will follow suit, or even that mine will continue this behavior, but here are some of the things my Credit Union has done for me while I've been a customer:
- opened a separate "in care of" business account with no charges
- gave me warning of an impending overdraft to allow me to cover it from other sources (saving me a black mark on my credit history and $50 in fees, half of which came right out of the Credit Union's pocket)
- free postage-paid envelopes and free cheque depositing
- couriered loan application documents to and from a local, non-affiliated Credit Union for signing and witnessing; both branches waived their fees
Customers of a Credit Union are actually "members." You buy a share in the company that forms the base of your account (it was only a few dollars for me when I joined, but now it's worth about $145), and join a financial community serving you and your neighbours. You vote at annual meetings and elections. Or not. It's up to you. The point is that you're not at the mercy of a greedy, faceless multinational corporation. The only shareholders your Credit Union answers to are you and the other members. It's a good deal.
Disclosure
I admit I am biased. I love my Credit Union, and this is obviously not a scientific, double-blind analysis of every financial institution. You should also know that when I wrote my Credit Union a letter of appreciation (I was moved to write a letter, they're
that good), instead of accepting my offer to buy lunch for the staff, they asked me to be in a series of commercials they were planning that summer. If you're still not sure about checking out your local Credit Union, I'll ask you the same question I asked in one of those spots:
What's your bank done for you lately?
(...cheesy fade out to logo screen.)
Links of interest:
Hamilton Municipal Employees' Credit Union
Government Information and Analysis
International List of Credit Unions
