Small banks, credit unions capitalize on big banks' fees
October 04, 2011
With a growing number of banks in the U.S. charging customers to have a checking account, small banks and credit unions are stepping up to let customers know that they still offer free checking and attractive rates on other services.
Smaller banks and credit unions are capitalizing on the death of free checking accounts at big banks. But free checking is just one of the advantages credit unions and small banks offer. Credit unions, for instance, are nonprofit entities owned by their members, so they can afford to help you save money. For instance:
- In contrast to the recent changes at larger banks, many credit unions still offer free savings accounts and checking accounts.
- Their out-of-network ATM charges are typically lower than big banks, and many credit unions belong to large networks that give you access to a wide variety of ATM machines.
- They offer some of the best CD rates you'll find anywhere. Interest rates on certificates of deposit at credit unions are sometimes nearly double the rates found at big banks.
- Interest rates on car loans, credit cards and home-equity lines of credit also tend to be lower. According to the Journal, the average interest rate on a new car loan at credit unions was 4.67 percent this summer, compared to 5.47 percent at banks.
Although you must meet certain requirements to join a credit union, joining is often a straightforward process. Your employer may be affiliated with a credit union or there may be a credit union set up for your community, church or school.
One reason big banks are turning to checking account fees is an effort to recoup the money they lost when financial reforms limited the fees they can charge merchants when you buy something with a debit card. New Federal Reserve rules cut those fees in half starting October 1.
But according to NPR, that rule only applies to banks with more than $10 billion in assets, so many smaller, regional banks haven't been forced to look for new ways to replace revenue. As a result, they may soon find themselves with more business.