Sunday, November 6, 2011

Six Reasons to Move Your Money for Bank Transfer Day (2 articles)

(I realize this is a day late but it's a good article...--jef)


 
Kristen Christian didn't know she was tapping into a wellspring of consumer discontent. She just knew she was fed up with her "too big to fail" bank's treatment of its customers. So she created a Facebook event called Bank Transfer Day and invited 500 of her contacts to move their money to credit unions. The response went viral.

Within weeks, Bank Transfer Day swelled to nearly 70,000 participants. Credit Union Times reported that several large credit unions were experiencing record account openings and funds transfers. Kristen's event had given thousands of unhappy bank customers a solution, and a day of action: November 5th, 2011.

Despite all the ruckus, 70,000 is only a fraction of the big banks' customer base. Many people have been with the same bank for most of their adult lives, and aren't likely to move their savings without a few good reasons, of which "my bank is evil" may not be the most convincing.

With that in mind, here are a few solid arguments for moving your money out of a for-profit bank and into a not-for-profit institution like a credit union. Making the move might be the smartest choice for your wallet as well as your conscience.

1. Share Responsibility for Your Money
Credit unions are cooperative financial institutions, collectively owned by their members. When you join a credit union, you gain the power to vote on how the union's funds are invested. Each member has one vote, regardless of how much money they have invested. Want to get involved on a more significant level? Any member can be elected to the volunteer Board of Directors, which makes decisions on interest rates, fees and other matters that directly affect members.

Andrew Schrage, a 25-year old Brown graduate in economics and editor of Money Crashers, looks forward to making the switch. "What bank customer wouldn't also want to be a part owner in their bank? A setup like this can significantly reduce any conflicts of interest or potential for moral hazard to play a role."

Think that sounds too good to be solvent? The World Council of Credit Unions reports that there are over 49,000 credit unions in 97 countries, with over 184 million combined members. In the United States, credit unions are guaranteed by the National Credit Union Share Insurance Fund, which is backed by the U.S. Government and has a higher insurance fund capital ratio than the FDIC.

2. Contribute to Your Community
You can easily search for credit unions with offices in your area. Here in Reno, a local search turns up a credit union for Nevada educators, one for electrical union members, one for Whirlpool employees and several for local residents. Most credit unions are specific to either a geographic region or to a professional or cultural group, giving you the ability to invest in your community's interests simply by participating.

A regional credit union, for example, can choose to invest in local business — or in services that benefit the community. No instances of banks buying other, failed institutions here; just a group of like-minded individuals putting money toward their common interests.

3. Share The Wealth
A Community Development Financial Institution (CDFI) is a bank, credit union, lender or fund that provides credit and services to underserved communities. For example, OneUnited Bank is African-American owned and focuses its efforts on serving and developing urban communities. The Center for Community Self-Help, on the other hand, provides services to low-wealth, rural and minority individuals seeking home and business loans.

If you join a CDFI, you may not see monetary returns on your investment. Rather, your participation helps provide a better future to someone in need.

Solidarity economy activist and organizer Mira Luna believes that investing in your community ultimately has greater benefit than saving your money in banks:
"A sustainable and healthy community is the best investment as long as you plan to stay: You will have a more joyful, healthy and abundant place to live. Rather than bottling up energy and hoarding it in bank accounts, community currencies ... facilitate the flow of energy and wealth in a community more locally, without leakage to outside corporations that spend their money elsewhere."
If you're looking to invest in people directly, you might also be interested in peer-to-peer and microlending sites like Kiva, Prosper or LendingClub. With LendingClub, for example, you can make loans to credit-worthy individuals in your local area that save them money and earn you a lot more than a savings account at a big bank.

For more information, see Five Community-Driven Alternatives to Banks.

4. Save Money
In October, Bank of America announced a new $5 fee for debit card purchases. For many of their customers, including Andrew Schrage, this was "the straw that broke the camel's back." Rising fees over the years have left customers feeling that their bank was trying to make them pay more than their share.

Karen Hawkins, a New York Times bestselling author and Master of Political Science, found the increase in fees infuriating partially because of bank executives' high salaries.
"The head of my soon-to-be-old bank made over 20 million in compensation last year. The head of the credit union I'm moving to made around $350,000. Which is now charging huge fees? Not the credit union."
Overall, credit unions tend to have lower fees, often offering fee-free accounts, along with higher interest rates and lower loan rates. If your money is tight, odds are you'll be better off at a credit union.

Don't just leap blindly and expect lower fees at all credit unions, however. Fee structures can vary; do your research before you switch.

5. Get Better Service
This one depends on how you define "service." Many credit unions don't provide widespread ATM access, online bill pay and other useful options you may use regularly. For some people, losing those privileges can be a major inconvenience.

That said, banks' attitude toward their individual customers can be irksome. Karen Hawkins recently discovered that when she made an online transfer between her accounts after 6 p.m., it didn't register until the following day.
"When I went to the bank and spoke to their one staff person about this unfortunate change, I mentioned that when I purchase something from my grocery store, the charge goes through right away, so why couldn't I transfer between my own accounts and have it be immediate. The staff person said, 'They're a bigger account so we have a different agreement with them.' I can't tell you how angry that made me."
Hawkins also notes that her bank tellers are under pressure to sell her new services. "I can't go through the drive-through line without a pitch of some sort."
For Andrew Schrage, poor service has been an ongoing issue.
"I am tired of being treated like a number rather than a person by my current bank. ... If someone is going to be watching over my money for me, I'd at least like to feel like they care about me as a person. I have not had this feeling with my current bank in a long time."
Shareable's Beth Buczynski recently closed her account at Wells Fargo after discovering that, unless she opted into two new account services, she would be charged a $15 "service fee." "I closed my checking and credit card accounts with WF later that week. During the appointment, the 'personal banker' never once asked me why I had chosen to close my accounts or whether I was satisfied with my experience as a customer."

For Beth, the difference between Wells Fargo and her credit union is night and day: "They know my name, and always ask me how my day is going. They never try to force me into buying new products or opening new accounts, because they're not a business."

6. Make A Statement
Ultimately, an act of protest may be one of the lesser reasons you decide to switch. But for many, it's the spark that has ignited their passion.

Kristen Christian certainly intended to make a statement when she started Bank Transfer Day. "The final straw came with the announcement of new monthly fees for any customers with less than $20,000 in combined accounts. It's apparent this new policy directly targets the impoverished and working class," she said in an interview. "If you don't believe in a company's practices or feel that a company's practices are unethical, then, very simply, you should not have money with that company."

Karen Hawkins agrees. "It's time we took a stand for our rights as consumers ... Our economy is in shambles from the mess made by big banks. I support capitalism and I don't mind people making decent money. I DO mind a business paying obscene amounts to their top few people while charging me and my business more and more for fewer and fewer services."

Andrew Schrage hopes Bank Transfer Day will communicate a clear message: "The American public is no longer going to tolerate unethical business practices or unfair fee hikes by our nation's big banks."

Ready to join the movement? Switching banks isn't a simple process, but it's not overly complicated either. Fearless Revolution's Field Guide to Closing Your Bank Account can give you all the information you need to proceed — including the hot tip that to complete the process by 11/05, you should start today.

And for some alternatives to Credit Unions see Five Community-Driven Alternatives to Banks.

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Why Bank Transfer Day Is Only the Beginning of Something Huge
The movement to make sure our money serves our own values rather than the bottom line of huge banks will only gain energy as small victories accumulate.
By Andrew Leonard, Salon
Posted on November  6, 2011
On Oct. 9, Kristen Christian, a 27-year-old art gallery owner in Los Angeles, created a Facebook page urging her friends to move their money out of the big banks on Nov. 5. The suggestion hit a nerve. By Nov. 4, 77,015 “friends” had declared their intention to “attend” Bank Transfer Day.

That doesn’t necessarily mean that 77,015 people will be pulling all their money out of the likes of Chase, Citibank, Wells Fargo and Bank of America all at once. Saturday is hardly an ideal day to get banking business done, and the process of switching over one’s account to a new bank or credit union is not something that can be accomplished — yet — with a flip of a switch. (Detailed advice on how to change your banking account can be found here.)

And of course, clicking your intent to do something on Facebook is a far cry from actually, well, doing it.

It’s also not clear that the big banks will take a big hit from Bank Transfer Day. The usually sensible economics commentator Felix Salmon goes so far as to assert that “the big banks are blithely unconcerned about people withdrawing their funds on Saturday … I’m not kidding myself that doing so is going to harm the big banks at all.”

In purely numerical terms, Salmon might be right, but there’s a larger sense in which he is almost surely wrong. The simple fact that one ordinary citizen using social media tools can start a grass fire of protest that captures massive media attention and connects hundreds of thousands of people to useful information is an encouraging sign of where our society is headed. Every single person who actually goes ahead with a switch of banks is casting a potent vote in the long-range democratization of finance. Even if the banks shrug it off, people who go ahead and change their bank will probably feel better about themselves. Just because it’s a psychotherapeutic clichĂ© doesn’t mean it’s wrong: Taking action is empowering.

And something is clearly happening here. According to a press release from the Credit Union National Association, “at least 650,000 consumers across the nation have joined credit unions in the past four weeks.”

CUNA estimates that credit unions have added $4.5 billion in new savings accounts. More than four in every five credit unions experiencing growth since Sept. 29 attributed the growth to consumer reaction to new fees imposed by banks, or a combination of consumer reactions to the new bank fees plus the social media-inspired Bank Transfer Day.

$4.5 billion here, $4.5 billion there, and pretty soon you are talking about real money, even for JPMorgan-Chase. In all of 2010, credit unions added only 600,000 new customers. But even more telling has been the decision by the big banks to abandon their plans to institute fees for debit-card use. Whatever the reasons for their capitulation, it’s hard to describe that about-face as representing a “blithe disregard” for how their customers are feeling.

Tracing out the cause-and-effect connections here are tricky. Bank overreach, Occupy Wall Street and Bank Transfer Day are all feeding into and reinforcing each other. If Bank of America hadn’t announced plans to charge a $5-a-month fee for debit card use and Occupy Wall Street hadn’t pointed an accusing finger at the financial sector with such a powerful media-amplified voice, Kristen Christian’s Bank Transfer Day might never have advanced beyond her own family and friends.

But now the genie is out of the bottle. Because it doesn’t stop on Nov. 5. The movement to go local, go independent, and make sure that our money serves our own values rather than the bottom line of huge banks will only gain energy as word spreads, and small victories accumulate.

Oh, and in the time it took to write this post, another 200 people decided to attend Bank Transfer Day. Inch by inch …