Can Credit Unions Make a Success of Bank Transfer Day?

After becoming increasingly frustrated with her bank's poor service and expanding array of nickel-and-diming fees, 27-year-old Los Angeles gallery owner Kristen Christian went where many of her generation go when upset: Facebook. On Oct. 4, she created a Facebook event called "Bank Transfer Day," which urged participants to move their money from banks to credit unions on Nov. 5, and sent out invitations to about 500 people.

The event itself bore the hallmarks of something conceived of on the fly rather than the result of careful planning. The designated date, it turned out, is a Saturday, when many banks are closed and have limited hours, and the call was changed from withdrawing money on that date to withdrawing money by the fifth. Additionally, despite Christian's public claims that the event was independent of the Occupy movement, its location was listed as "Occupy Wall Street" for the first several days that reference was removed.

However, such minor details seemed irrelevant to the flood of people who began RSVP'ing and spreading invitations in the days after Christian first posted the page. Three days into its existence, almost 9,000 people had indicated their intention to attend, and as of Oct. 31, that number had ballooned to about 68,000. Obviously, the ideas behind Bank Transfer Day have struck a nerve, but why did it become so popular and in this particular form?

A confluence of trends

First, and most obvious, has been the spread of the Occupy movement throughout the country. While protesters in Liberty Plaza can march right over to the actual Wall Street to express their disapproval, supporters of the Occupy movement in the rest of the country don't have such obviously symbolic targets.

Virtually everyone does, however, have a bank account, and moving one's money from a "Wall Street" bank to a local, cooperatively owned credit union is a fairly simple step that sympathizers who live far from Lower Manhattan can take. As such, despite Christian's attempts to put a bit of distance between the event and the growing Occupy movement, the networks that have formed since Occupy Wall Street began have been vital to spreading the Bank Transfer Day's message.

Additionally, Bank Transfer Day is built upon a protest model that has been developing and evolving since the bailouts. Shortly after the Troubled Asset Relief Program was passed, there were a few scattered pro-credit-union protests of bailed-out banks, but the idea of politicizing the choice of financial institution picked up steam when The Huffington Post wrote about the "Move Your Money Project" in late 2009.
The campaign, which encouraged people to take their money out of "too big to fail" banks in favor of community banks and credit unions, received a wave of positive press coverage when it launched, and its main video (directed by acclaimed filmmaker Eugene Jarecki) has been viewed almost 600,000 times on YouTube. When the project got wind of Bank Transfer Day, it helped spread the word by alerting its network of more than 40,000 Facebook fans and 3,000 Twitter followers. [Disclosure: The Huffington Post and now have the same corporate parent.]

As for the credit union movement itself, which obviously stands to gain most from the Nov. 5 event, the reaction was initially slow and cautious. Its first mention in Credit Union Times took place on Oct. 10, when Mark Wolff, the Credit Union National Association's senior vice president for communications, said the trade group welcomed Bank Transfer Day as an expression of "just how angry consumers are becoming with their treatment by big banks."

Since those measured first statements, however, the movement has embraced the idea with increasing enthusiasm both nationally and locally. On Oct. 26, CUNA announced the release of Bank Transfer Day T-shirts, and both state associations and individual credit unions have been actively promoting Bank Transfer Day in their advertising.

Will It Work?

All of this begs the question: How successful will Bank Transfer Day actually be? On the one hand, a perfect storm of emotional frustration over new bank fees, sympathy for the Occupy Wall Street protests, and the positive benefits of credit union membership could combine to provide enough motivation for a critical mass of people to make the switch and thus alter the make-up of the personal financial services environment in a meaningful way.

On the other hand, it takes a lot more effort to change financial institutions than it does to RSVP to a Facebook page. DailyFinance reporter Catherine New noted that, statistically, 60% of people who start trying to change financial institutions ultimately fail to do so because of the complexity of the process. Additionally, certain voices within the credit union movement have been urging caution and expressing concern that some credit unions have been overreaching by bank bashing, that some of the new customers won over from banks might hurt rather than help their bottom line, and that a sudden flood of new deposits might cause accounting headaches by distorting capital ratios.

With so many factors at play, it's hard to know exactly what the financial services industry will look like once the Bank Transfer Day phenomenon has run its course. Will it turn out to be a simply symbolic gesture of frustration that raises awareness about credit union but leaves the pre-eminence of the big banks unscathed? Or will the event serve as a catalyst for a fundamental shift in the market share distribution between banks and credit unions, adding yet another headache for the already beleaguered banking sector to grapple with?

All that's certain is that the time until Nov. 5 will likely be one of the most contentious moments that the historically uneasy relationship between banks and credit unions has experienced in a very long while.

Matt Cropp is a Motley Fool contributing writer.

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James Stein

Ever since the big banks began testing debit card fees, credit unions have been presented as their virtuous counterpart whom consumers have been directed to entrust with their money. However, the story is much more complicated than that.

See, credit unions were exempted from the Durbin Amendment and as a result they have no revenue shortfall to make up for. It's important to keep in mind that credit unions may not be charging their customers any debit-related fees, but the fees they charge retailers accepting their debit cards are now much higher (83%, to be exact) than what big banks charge.

So we should not be losing sight of the issue that got the whole thing started – the size of the interchange fees. The way I see it, the issue is a very simple one. If a fee charged by one bank to a retailer is considered too high, it should also be considered too high if any other bank charges it to that retailer. I just can't see it any other way and I can guarantee you that retailers see it exactly the way I do.

November 13 2011 at 2:26 PM Report abuse rate up rate down Reply
Russell Bennett

We need both the banks and the credit unions.Some projects are to big money wise for most credit unions.
They are fine for a family or small bus.

November 05 2011 at 11:29 PM Report abuse rate up rate down Reply

People lived most of their lives without credit cards.
Oh ,how did we do that???? easy.
I hav e one credit card... I use only for emergencies.
When I did not have an emergency for four years the VISA CALLED me they told me would have to start using it or they would not honor it anymore.
I told them. Have at it.
Still have the card three years later and have not heard from them again about recinding it.
If we let the Credit Card Companies rule we have only ourselves to blame.

November 04 2011 at 5:57 PM Report abuse rate up rate down Reply
Jesse A. Rieber

People ned to stop believing that THE MARKET is some hidden thing. You are the market! You nhjeed to vote with your money! It is a time for a run on the banks. Destroy your credit cards and pay them off! Remove your bank account, irrespective of how small, from banks and place it in Credit Unions where you are a member not a MARK, and where they do not gamble with your money!

November 04 2011 at 11:28 AM Report abuse rate up rate down Reply

We could sdolve our defict if the credit unions were taxed like all other businesses. They get all the powers with no help for the tax situation. Another government program sweept under the rug. Everybody else has to pay to play.

November 04 2011 at 9:51 AM Report abuse -1 rate up rate down Reply
1 reply to tealb's comment

Somehow I doubt that the solution to the deficit is raising taxes on credit unions, which are taxed in the same way as most cooperatives... Cutting the military budget and bloated entitlements is the only way we can hope to balance the budget. Talking about new taxes is silly.

November 04 2011 at 10:58 AM Report abuse rate up rate down Reply

I guess that this might have been a wake up call to the "to big to fail banks" will all their bailout money from President Obama and the multi-million dollar CEO bonuses. Your local credit union is run by folks that know your name and make an average livable salary. They also give you free checking and your savings account and CD generally pays anywhere from a 1/4 to a 1/2% more than the to big to fail banks. Now you know how these enormous benefits are paid to the CEO's. Just a little 1/2% off the top of your what you should have been earning in interest is all..............

November 03 2011 at 5:37 PM Report abuse rate up rate down Reply
1 reply to barryaclarke's comment

Moving to credit unions is indeed a n excellent means of providing a voice for your rejection of failed big government policies. By rejecting the heavily taxed and regulated banks in favor of the lesser regulated and untaxed credit unions, citizens "vote with their feet" for the primacy of markets over knuckle-dragging goons.

November 09 2011 at 3:09 PM Report abuse rate up rate down Reply

Moved from a large bank to a locally owned two-location bank in my small town. I re-fi'ed my home mortgage in under four days from start to finish. Everything is easy, and I run into the pres in my local supermart. Debit cards, free chacking (business and personal) and quick responses to any questions have me a believer.

November 03 2011 at 4:53 PM Report abuse rate up rate down Reply

I already closed my Chase account today. No more $12 fees/month

November 03 2011 at 4:48 PM Report abuse rate up rate down Reply

REPEAL the DODD/FRANK BILL and the DURBIN AMENDMENT......................

November 03 2011 at 3:47 PM Report abuse -1 rate up rate down Reply

Does anybody know why credit unions offer lower fees than most banks? Because they don't pay any federal income taxes. It is estimated that this costs the Federal Government is losing maybe a billon dollars a year in taxes.

November 03 2011 at 3:40 PM Report abuse -1 rate up rate down Reply
3 replies to jshonkiv's comment