Credit unions grow on big banks bad karma

November 14, 2011
| By Pete Daly |
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National Bank Transfer Day on Nov. 5 received a lot of publicity, but by then, credit unions had already signed up many new members over the month of October.

Lake Michigan Credit Union, the second largest credit union in the state and the largest in West Michigan, opened up a record number of new accounts in October.

Grand Valley Co-op Credit Union added 42 new members on Friday and Saturday, Nov. 4 and 5, and 163 in the month of October — a 48 percent increase over October last year.

Option 1, the direct descendent of the telephone workers credit union set up in Grand Rapids during the Depression, saw a higher-than-average number of new accounts in October.

DFCU Financial, the largest credit union in Michigan with $3 billion in assets and four locations in Greater Grand Rapids, also had a steady increase in membership in October.

Bank Transfer Day was the result of customer rage at some major American banks’ attempts to increase fees on debit card use, with activists exhorting people to cancel their “big bank” accounts on Nov. 5.

The actual impact of Bank Transfer Day was probably “nominal” at Lake Michigan Credit Union, according to Don Bratt, vice president of marketing. However, he quickly added, “We did see an increase in October — a record month for new checking accounts.”

LMCU has assets of $2.2 billion and more than 178,000 members. It just opened its 32nd branch at Knapp’s Corner.

“We have seen an increase in new accounts throughout the past month — through October,” said Jerri Schmidt, vice president of marketing at Option 1 Credit Union, headquartered on 32nd Street in Wyoming.

Schmidt said the Occupy Wall Street movement had “a lot of folks talking,” but she noted that Oct. 20 was also International Credit Union Day, “so there was a lot of good publicity going on out there with respect to the contributions credit unions have made.”

Option 1 merged several years ago with a Lansing health workers credit union and changed its name. It had been known up to then as Bellcom Credit Union, derived from its original name Telephone Company Employees Credit Union, according to Schmidt.

Founded in Grand Rapids, it was “literally born out of the Depression,” she said.

“A lot of folks are kind of going back to the basics when it comes to banking. They are looking for every dollar they can possibly get from their paycheck into their budget. In doing so, I think that’s a time when people reflect back and look for other alternatives.”

In summary, Schmidt said she believes that consumers’ attempts to hang on to as much of their money as possible, combined with the negative publicity about big banks such as Bank of America, Chase and Wells Fargo, “has definitely had an impact” on the surge in new accounts at credit unions.

“Yes, we saw an increase” over the Bank Transfer weekend, said Kim Ward, a spokesperson for DFCU Financial in Dearborn.

She clarified that by adding that the increase in memberships was actually throughout the entire month of October.

“Ever since the B of A announcement, we’ve seen a steady increase,” said Ward, referring to the Bank of America announcement in late September that it would begin charging a monthly $5 debit card use fee. A consumers’ outcry caused Bank of America to cancel that planned fee and also led Chase and Wells Fargo to back off on new and increased fees.

“People were quite irate,” said Ward.

Like Bratt at LMCU, Ward does not believe National Bank Transfer Day really had much of an impact, by itself.

“We believe that if people are going to switch accounts, they are going to do it when it’s convenient for them, not necessarily on one day. That’s why I think overall, we and other credit unions have seen an increase (in accounts) since the (Bank of America) announcement,” said Ward.

Ironically, on Oct. 25, DFCU Financial announced its annual dividend to be paid to eligible members Jan. 4 would total $21 million. Those eligible members include 70,000 people in the Detroit area, 7,000 in Ann Arbor, 5,000 in Grand Rapids and 3,000 in Lansing.

“While big banks are raising fees, eliminating free checking and charging for debit card usage, DFCU Financial, Michigan’s largest credit union, is doing just the opposite — giving away money,” stated the Oct. 25 announcement.

According to DFCU Financial, it is the only credit union in the United States to pay members an annual dividend of $18 million to $20 million per year for the last six consecutive years.

LMCU’s Bratt said his organization really likes to promote its lack of fees.

“I just think the added publicity on fees (charged by big banks) and what things cost is making people more aware of what it costs to bank at a certain institution,” said Bratt. He conceded, however, that individuals who typically have a low balance in a bank checking account might be more likely to switch their checking to another institution, “but people with a bigger relationship aren’t going to bother.”

Grand Valley Co-op CU said in a statement last week that “at least 27,900 Michiganders bolted from their banks and higher fees.”

GVCCU noted that the average age for a credit union member at the end of 2010 was 47, yet 37 percent of the new members added in October were between 20 and 39.

According to an e-mail sent by Maureen Brown of Huntington Bank in Western Michigan to the Business Journal: “Bank transfer day did not impact us. In fact, we opened accounts. We have been at the forefront of eliminating fees with our 24-Hour Grace product which gives consumers 24 hours to make good on an overdraft. Also, we are not charging fees for credit cards and do not plan to.” She also said that Huntington does not charge a fee for debit card use.

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