Don’t Be a ‘Bank Transfer Day’ Lemming

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Bank Transfer DaySaturday was ‘Bank Transfer Day.’ Spurred by the $5 debit card fee Bank of American planned to charge customers, a movement was born to get banking customers to switch from big banks to credit unions. Why they planned it on a Saturday when most credit unions are closed is anybody’s guess.

Today in the Washington Post, Ian Shapira writes about the young women supposedly behind the mass exodus from banks. Her name is Molly Katchpole, who is described as a “22-year-old underemployed college grad who ignited a nationwide movement against Bank of America. . . .” Katchpole penned a petition titled, Tell Bank of America: No $5 Debit Card Fees.” Now, I knew this petition and I were not going to get along right from the first few sentences: “When the recession first hit, we gave Bank of America billions of dollars in bailout money. Our reward is higher fees for the same services.”

Actually, our “reward” was $4,571,516,269. That was the profit the country made on our investment (we didn’t “give” B of A anything) into Bank of America as part of the bailout. To be specific, the government purchased preferred stock with warrants.

Now I can just envision the emails I’ll receive–”DR, why are you defending big banks? They must have paid you to write this crap!” As an aside, I can’t tell you how many people have accused me of being paid to write articles about big banks. Apparently, if you don’t join the “movement,” you must have been paid off. Nope. Full disclosure–I don’t bank with BofA, I don’t use its credit or debit cards. And I have absolutely no affiliation with the bank at all.

Here’s the deal. For some reason Bank of America’s $5 debit card fee struck a nerve in our country. In some ways it reminds me of the reaction to Netflix’s price hike. And I think it’s absolutely ridiculous. We pay $5 for a cup of coffee, $15 per ticket to go to the movies (not including snacks), and upwards of $100 or more per month for cable. But even think about a $5 monthly debit card fee, and all hell breaks loose.

On top of that, our representatives in Washington have proven totally ineffective. President Obama has shown a stunning lack of leadership on economic issues, pitting the “rich” against the rest of us rather than uniting the country to solve our financial problems. And both the Republicans and Democrats in the House and Senate are no better.

So what do we do? Start a movement over a $5 monthly fee. Really? That was the best we could come up with? That’s like a passenger on the Titanic complaining about the tea service. I don’t like fees of any kind. But if I were to create a list of the most ridiculous fees and costs many of us face every day, a $5 monthly debit card fee wouldn’t make the top 25. The funny thing is the movement worked. Bank of America announced it won’t be charging the $5 fee.

And that brings me to Bank Transfer Day. Sparked by the $5 fee, organizations like moveon.org are passing out the pitch forks and torches in an effort to get folks to switch to credit unions. Apparently, more than 650,000 have already switched, according to Martha C. White of Time’s MoneyLand blog. I suspect many will regret their move.

Credit unions can be a great banking option. Recently, I published an article about great credit unions based on input from readers of the Dough Roller Newsletter. And in college I kept my money with a credit union. But this could be a case of the grass is always greener on the other side.

Many credit unions have some significant limitations. Most have very few branches, so getting to the bank may prove difficult. Unlike a big bank with 24/7 customer service, credit unions can be impossible to reach during the evenings and weekends. And contrary to popular belief, credit unions do charge fees. In 2010 alone, for example, credit unions charged consumers $13 billion (yes, billion with a b) in fees.

I’m not switching. As I’ve said before, I bank at Citi. I’ve banked with Citi for 20 years. I don’t pay any fees for my checking account and get free ATM transactions at every 7-eleven. Why would I switch?

But more importantly, do what’s best for you. If switching to a credit union is the best option, do it. If staying with Bank of America is your best option, do it. And if moving to an online bank is the best way to meet your financial needs, go that route. But for goodness sake don’t make a switch because it happens to be “Bank Transfer Day.” And don’t believe that a credit union is your best option without carefully weighing the pros and cons.

In a previous post, I quoted a portion of an email I received from a reader about his credit union. Here’s the entire text of his email:

This is my response on the banking newsletter recently published. You requested feedback; here is my experiece with our local Credit Union. Recently they underwent a system upgrade and were closed for 4 days. We were unable to reach anyone or do online banking during this time. Now mind you, we were given fair warning, but money needs always arise at the worst time. When finally able to bank online again, I tried to access the transfer funds tab that had always been available since we set it up after joining to send money into my daughters account. Well, both of her account numbers had disappeared, and to make matters worse, I am out of the country and unable to call them directly due to phone unavailability and time difference. I sent a plea via email as this was a most urgent matter. What do they do, they change my password, making it impossible to even access my account. Oh, this whole ordeal began on Sunday and by today, Thursday, it still is not resolved. Sadly, this has not been the first issue with them either.

Since they are small, there are only a few offices. They are not easy to travel to, I could not get there and back on my lunch hour, so I have to go on Saturday morning. Once the day ends there is no way to contact anyone at the bank. Too bad if you have a problem – you will just have to wait until the next day to resolve it. For what it is worth, my experience with our local Credit Union has been terrible. As soon as I get back home I feel I can find a bank that gives me less headaches. The negative outweighs the positive by far with this institution.

My point isn’t to bash credit unions. Instead, I’m trying to bash the notion that credit unions are always better than big banks. They’re not. You have to do your homework and make the best choice for you.

And if you decide to make a change, check out how to Change Banks in 5 Easy Steps.

Photo Credit: alyceobvious

Published or Updated: July 12, 2012
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. theaccusersgift says:

    The reason they picked Saturday, November 5th, is because November 5th in England is celebrated as “Guy Fawkes Day”, which was popularized in American culture by the movie “V for Vendetta”.

    • DR says:

      Thanks for the info.

  2. the truth says:

    Now if only people would create a movement over the $100 cable bill or cell phone bill….

  3. Jim Graham says:

    Wow, how amazingly far afield of ‘the point’ you have struck.
    The real point is not the $5 fee. That is merely the water in the hot grease that has sparked a fire. The hot grease is the level of disservice and financial misappropriation of massive proportions that big banks propagated, and which put the economy in the tank for three years (and counting).
    The point of the $5 fee is the same as the fees that airlines charge: A fee is run up the flagpole, and the winds are sampled for acceptable reputation damage. If the inevitable damage is acceptable, the abuse will continue, and increase, with new and additional fees imposed on the customer. The difference between the airlines and the big banks is that the airlines really do hold a collusionary monopoly, in lock step with a government agency that enforces the cartel’s will and limits it membership, while banking is a relatively competitive market with lower barriers to entry.
    Those relatively lower barriers have provided consumers with thousands of options – virtually every community has a community bank, or two, or dozens, and probably a credit union, or two, or several.
    My community bank is the second strongest bank in California (including the big banks…), and my bank’s people know me, know my business, and care for me, my business, and this community I call home. And, I can access my funds FOR FREE at every 7-11 in the country, so your big advantage (sic) for Citi is neither a true competitive advantage nor adequate justification for the benefits and profits of your banking being exported from your community to Citi headquarters.
    Good to know you didn’t switch. And keep on pimping those “Rewards” cards that punish merchants by extorting the ‘reward’ directly from business revenues. Keep pimping the banks that falsely and selfishly take relationship advantage for that extortion shift that lands on the shoulders of businesses in your community, and adds additional insult and injury on top of your willful support of your money’s power being drained from your community.

    • DR says:

      Jim, it’s good to hear from you again. I always enjoy your comments, even if we don’t always see eye-to-eye. You refer to the “the level of disservice and financial misappropriation of massive proportions that big banks propagated, and which put the economy in the tank for three years (and counting).” I couldn’t disagree more. Certainly the banks played a significant role in our economic decline. But so did our government. In fact, I credit the 9% unemployment rate today to our government’s complete failure to address our growing debt and deficit. We’ve lost all confidence in our government to do the right thing. And if we are being honest with ourselves, we have to take some of the blame, too. There would never have been a real estate bubble followed by a crash if we didn’t bid up the price of homes like crazy. I know it’s much more popular to hoist all the blame on Wall Street, but the problem is much, much bigger.

  4. Pat says:

    First, it’s not just $5 a month, it’s $60 a year and on and on. Secondly, the “movement” is not about $5 a month. It’s about being nickled and dimed to death. Fees, fees and more fees and not just from Bank of America or even from banks in general. I don’t have statistics to prove it, but I doubt that all of these fees are necessary. It’s more like greed; if they can make a little here and a little there, they think we won’t notice, until someone piles on the straw that broke the camel’s back and guess what? We noticed. We knew it before, but this brought it home. We are paying CEO’s salaries when we can hardly live on our own. Why should we?

    I was glad to see the people rise to the occasion. It gave me renewed hope in America – that we still can make ourselves heard above the roar and clash of those who think they can do anything.

  5. I am like you believing that it makes the most sense to do whatever works best for each individual. I am with a big bank and don’t pay any more fees than I did 10 years ago so it doesn’t make any sense for me to change either.

  6. Jim Graham for president! I love replies like this. Fantastic job crushing this author. Isn’t the point of this blog to advise it’s readership on how to save. How about advocating avoiding all types of bank fees, credit card fees, or any other type of avoidable fee.

    If banks can be bailed out by the government and tax payer, regardless of the return on investment, then banks should have been required to assist it’s mortgage holders on easy refinancing regardless of the debt to equity ratios currently required. Drop everyone’s loan to the current available rates. Banks have to incentive to help people. They are required to be profit making organizations. However banks lobby the government and the government sides with big business the majority of the time since they finance campaigns. It’s a broken cycle that won’t be fixed without protest.

    • Jim Graham says:

      Thanks for the kind words, Brandon. I’ll pass on that run for President.

    • Michael says:

      I don’t think so Brandon.

      Two wrongs don’t make a right and bailing out consumers will teach them nothing. They agreed to take on the debt they have and payments can’t be met, bring on the consequences. This Bank of America lawsuit over NSF fees is a perfect example.

      Settlement just came in for $410 million and consumers are outraged because it’s only about 10% of the NSF fees BOA collected over the years. In college, I generated a large amount of them but guess what? I deserved every single one of them because I knew the rules, and I still over drafted my account.

      I’ll collect my $27 settlement like everyone else and probably donate it somewhere because I don’t deserve it. No one does. Anyone who thinks BOA should pay them back is fooling themselves. I borrowed from the bank on my deposit account and I payed the price.

      Go on the warpath and teach consumers how to use the system to their advantage. The game is very fair and an educated consumer can avoid all the “traps” banks set. It beats the hell out of barking about single digit fees and complaining about things that shouldn’t matter in life.

  7. Rob says:

    Wow….for someone who usually has a good sense of what to write about and how to write about it, this post clearly misses the point by a good margin.

    Leaving aside for the moment the gratuitous swipe at the protest’s participants as “lemmings,” I was struck by the straw man question in the e-mail that brought me to this article: “Would you change banks over $5?” The obvious answer, at least for most people: no, of course not. But Bank Transfer Day was not about $5, nor even about the $60 annually that would result. If this were the first time that the big banks had tried to stick it to the smaller account holders, nobody would have blinked. The $5 fee to use debit cards, besides being a tax on the right to actually access your money, is indeed more of a “last straw” than anything else. Combined with all the other fees and charges that big banks are passing along to consumers, while simultaneously sitting on a hoard of TARP money that was intended by Washington to free up frozen credit markets, the $5 was in fact a “last straw” for many.

    I did not participate in Bank Transfer Day, but only because I had moved my money out of Chase several months earlier. The impetus, for me, was yet ANOTHER charge: this one, a $12 fee that was going to be levied EACH TIME I accessed an overdraft account designed to help me avoid (you guessed it) still ANOTHER onerous charge: a $35 overdraft charge! The bank to which I moved was not a credit union, but a small community bank, and while their fees and charges are NOT zero, that’s not the point either. I now pay a substantially smaller amount for overdrafts; I am charged nothing at all for accessing the overdraft account; and ATM fees that are charged at any other institution in the country are reimbursed monthly by my bank. In short, they get compensation for the services they offer, but they are NOT looking to protect the interests of millions of stockholders; they are instead looking to protect the interests of their actual customers. It’s breathtaking. The only way I could get Chase to give a damn about me is if I bought several million shares of their stock.

    No doubt the snarky answer, for at least some readers, would be to simply avoid the overdraft charges by not spending more than what is in the account, a response that is as tone-deaf as the brainiacs that advise protesters in Zuccotti Park to solve their problems by “getting a job.” If your financial management is so pristine that you never, ever incur overdraft charges, nor ever need a debit card, and can successfully avoid the myriad other charges that the banks are looking to fatten up their bottom line, then bravo. Similarly, if you can avoid the scourge of unemployment by “getting a job” (gee, why didn’t *I* think of that???), then hats off to you. But for customers who no longer have a paycheck to directly deposit to avoid those fees, or who cannot maintain the average monthly balance of $1,000 or $2,500 or $10,000, then it’s a fantastic thing that there are alternatives.

    Either way, your readers deserve more respect than to be branded as “lemmings” for a movement that, much to your surprise, actually “worked” in getting the fee rescinded. Weep not for Wall Street’s big banks; they still have dozens and dozens of ways to gouge their customer base, aided and abetted by the unconvicted criminals in Washington D.C. I’m just glad to see that, at least temporarily (and hopefully permanently), that customer base is shrinking.

    • DR says:

      Rob, thanks for your comment. My only response is that I didn’t call me readers “lemmings.” What I said was folks shouldn’t simply follow the crowd away from big banks to credit unions. That choice won’t be best for everybody, and I suspect, many who have switched will eventually move back to larger financial institutions.

  8. Lynn D says:

    I was upset when I first received a letter from my bank stating it would be charging $5 for ATM service. For those who do not use direct deposit, there is also a $7 charge but the second charge will not affect me.
    I do feel like I am being “nickeled and dimed” to death at times. I had to think long and hard about whether it was worth it for me to pull my money out of one bank and put it in another. For me, personally, it is not worth the hassle of changing banks. Yes, it is $60 a year that I could save. But, I remember the problems I had not long ago when my bank was bought out by another bank. I had to deal with changing banks even though I was still technically with the same bank. Several branches closed, including the one closest to me. It took me several days for me to be able to access my funds. Now, I have access to my Social Security on the day it is sent, even though it is still “pending”. My aunt has to wait several days for her money to clear before she is able to access her money.
    Most of the younger people do not remember banks used to charge many more fees than they do now. When I first started banking (about 30 yrs. ago in case you are wondering), there was a monthly maintenance fee and many banks charged either a per check fee of around .10 each or charged a fee if you went over a certain number of checks. Then there was also the cost of having new checks printed up regularly through the bank which charged about $13-20 for a couple of boxes. There was no 24hr access to your bank, no ATM cards, no easy way to keep track of your funds.
    While I don’t like having to start paying the $5 charge, the benefits of using a bank, of having so many ways to access my account and keep an eye on it, of using a debit/bank card to purchase things and pay most bills without having to carry a checkbook all of the time makes it worth the $5 charge because I remember how much it used to be without nearly as many benefits to go along with the service charge. Personally, I don’t think that is such a bad deal when I think about it.

    • DR says:

      Lynn, thanks for the comment. I too remember when bank fees were higher. The good news is that there is a lot of competition in the banking, which results in plenty of no fee checking account options.

  9. Fred Gerle says:

    If I had that much trouble trying to “bank” with an institution, I would have given it a month. Then, “sayonara”!!

  10. Janet Kerzner says:

    I also am not changing and I am staying with Bank of America. Why? Because I am a gypsy and every once in a while I like to shift gears and go to another State. Bank of America is everywhere. As far as credit unions being very scarce, in Florida, Space Coast Credit Union is all over the State of Florida. They are everywhere. You don’t have to go far to find one. I did bank with them a few years ago, then moved north. They were excellent! They also have Kennedy Credit Union, but not as many as S.C.C.U.. Check it out and you’ll see what I’m talking about.

  11. Devin says:

    Maybe you should change the name of the blog to Tea Party Finance since you parrot their anti consumer views.

    • DR says:

      Devin, I couldn’t disagree more. In fact, this post empowers consumers. It suggests one shouldn’t change banks just because some “movement” tells you to. You should do what’s best for your personal finance needs. If that happens to be a big bank, then that’s perfectly fine. If it happens to be a credit union or community bank, that’s fine, too. How in the world could anybody view that as anti-consumer?

  12. Anne Hartley says:

    I have never spent $5.00 on a cup of coffee, nor $15.00 on a movie ticket (well, unless it’s for a live HD performance of opera from the Met) or have cable at all. ($100.00!!).

    I never pay bank fees, unless I do something stupid, and then realize it was my fault.I have about 3 local banks, with a large bank for everyday use, a small one for a separate account with interest (not high interest now, but it was) and another for CD’s and a credit card. I have CD’s at various local banks, depending on where the deals are best at the time.

    I don’t like ‘movements’ either. I admit to suiting myself when it comes to banking. When people act by switching banks and other institutions when they are not happy, that is the best way to institute change. Far better than the government stepping in to hold our hands all the time.

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