Go Fire Your Bank!

What’s the difference?

Let’s start at the national level with the big banks. A friend of ours recently won (partially) a battle with Bank of America. He’d been charged more than $300 in fees for withdrawals and other services. These charges were automatically generated and billed to him without his knowledge. His beef was that the bank was exploiting a way to generate extra revenue, simply because it was able to. After many fierce bouts with dull-eyed customer service reps, he managed to bring down his bill to around $100.

That’s the thing. Big banks are big business. They’re revenue engines for shareholders. This is evidenced through the “products” offered by big banks, as well as the constant advertising these companies purchase. These advertised products are in the same model of a retailer or even a restaurant. In fact, bank tellers increasingly behave like wait staff, pushing the specials and suggesting dessert, hitting you for a buck if you’d like a side of horse radish. It’s that veil of customer service that masks the greater goal: to get your money, keep it, and get more of it. But a financial institution should keep your money safe and accessible, not run profit-grabbing burns on customers.

A credit union, on the other hand, is a not-for-profit, beholden to its patrons. This co-op model offers many of the same services, but at generally better rates [see chart below]. This is because credit unions are not driven to turn a profit. Any revenue generated goes back to the members or at times into community development. The Federal government insures credit union accounts in the same way, and at the same levels as banks. And these aren’t antiquated financial throw-backs either, they offer the debit cards, ATM services and most of the other what-nots you’ve become accustomed to. On top of this, people tend to enjoy their personal banking experience with credit unions more than BIG banks.

Personal finance columnist Liz Pulliam Weston in April wrote, “Banks hate— hate— credit unions. President Franklin D. Roosevelt signed the Federal Credit Union Act into law in 1934 to ‘promote thrift and thwart usury,’ and banks have been gunning for them pretty much ever since.”

Now, on the local level the basic difference between banks and credit unions remains the same: banks generate revenue for stock-holders (often not local), or for private owners (sometimes local, sometimes not), while credit unions function as a co-op for their members. But there are exceptions. Some local banks have a large majority of stock holders in the local community, so their profits tend to stay local. Also, occasionally, there are community banks that put a high value on meaningful community investment and are backed by stock holders who share this ideal. So the simple difference between credit unions and banks gets a little more complicated once BIG banks are out of the picture.

In Portland, Oregon for example, there are two banks, Albina Community Bank and ShoreBank Pacific, who put a good deal of focus on value-oriented community investment, much more so than any of the local credit unions. Albina Community Bank also boasts that a good deal of its shareholders are local and a good deal of its profits remain in the local economy. ShoreBank Pacific, on the other hand, is not a local bank, but argues that a significant portion of its profits remain local, and that it is the only financial institution that has a triple bottom line: profit gets equal value to community, conservation and economy. You can see how simple categories such as “banks versus credit unions” start blur at the local level.

Your job is to learn who is who, and put your money in the local financial institution that best reflects your values.

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