Frustrated by one too many nickel-and-diming fees from her bank, LA gallery owner Kristen Christian created a Facebook event on Oct. 4 that called for people to move their money from banks to credit unions. Titled "Bank Transfer Day" and scheduled for Nov. 5, the event struck a chord with a large number of people. More than 70,000 RSVP'd in the month leading up to the action, and its rapid spread and synergy with the burgeoning Occupy movement ensured it a flurry of (mostly) favorable media coverage.

However, it's easy to click a link on Facebook; going through the process of closing a bank account one has used for years, changing direct deposits, canceling credit cards, and so on, is a much more intensive affair. Additionally, some credit union observers viewed the scheduling of the event on a Saturday (when many banks are closed) as a mistake, arguing that "[i]f something like Bank Transfer Day were to ever really take off in the credit union industry, it would need the support of trade associations like CUNA [the Credit Union National Association]."

Building momentum
In the first few weeks after the announcement of Bank Transfer Day, word spread, in large part through the online networks of the Occupy movement. The event was touted by the main Occupy Wall Street Facebook pages and seized on by the Occupy groups in many smaller cities as an effective form of local action against "too big to fail" banks.

As for the credit union movement itself, the reaction was initially cool but supportive. However, as the event continued to pick up steam and draw media attention, movement trade associations and individual institutions alike started to increasingly embrace and support Bank Transfer Day. Many credit unions ran radio ads touting the event, and CUNA released special "Bank Transfer Day" T-shirts with messages such as "FEE-H8R" and "CU > Bank." In the final week, the headlines of Credit Union Times and major credit union blogs were dominated by discussion of the logistics of and possibilities for the coming event.

A final boost came on Nov. 3, when CUNA announced the results of a survey, which showed that approximately 650,000 people had joined credit unions since Sept. 29 (the day Bank of America (NYS: BAC) announced its reviled and since-rescinded $5 per month debit card fee) and that they had brought about $4.5 billion in deposits with them. JPMorgan (NYS: JPM) and Wells Fargo (NYS: WFC) have also rescinded their proposed fees.

To put those numbers in perspective, more people joined credit unions in October than had done so in the entirety of 2010. Though the survey was unable to parse out how much of this explosive growth was simply driven by the introduction of new bank fees versus how much was motivated by Bank Transfer Day, it's clear that the action was already having a major impact.

The day arrives
In preparation for Nov. 5, many credit unions decided to extend Saturday hours and add extra staff to accommodate the possible added load of setting up new accounts, but there was a great deal of uncertainty as to what the day would actually bring. Having spoken with many credit union leaders, the editor of Credit Union Times noted that she is "not sure anyone knew what to expect from Bank Transfer Day, because what people say they'll do is very often different from what they actually do."

Though detailed statistics on the day are not yet available, anecdotal reports suggest that the preparations made were not in vain. In Joliet, Ill., Numark Credit Union reported that in the four hours its locations were open, they opened 26 checking accounts and made several loans and business referrals. By contrast, the credit union's executive vice president noted that "[o]n a usual Saturday, we're lucky if we open two accounts."

Bank Transfer Day was also an occasion for increasingly open cooperation between credit unions and the Occupy movement. According to The Wall Street Journal, representatives of several credit unions visited the Occupy Wall Street encampment in Zuccotti Park to educate people about credit unions and assist them with opening accounts, and members of Occupy Philadelphia reached out to Credit Union Times for help finding knowledgeable credit union people to help run a teach-in. Protesters in a number of cities also celebrated the event by picketing in front of banks, and in Seattle, an estimated 100 Occupiers marched two miles from their camp to open credit union accounts en masse.

The road ahead
Though the final numbers are still coming in, it's clear that Bank Transfer Day was a resounding, if unanticipated, success for the credit union movement, which gained an enormous number of new members and a great deal of free publicity concerning the nature of their model. Already, the movement is abuzz with chatter about how to continue building momentum, with suggestions including increasing outreach to the "unbanked" and initiating a "national branding campaign."

What remains to be seen is whether this particular wave of customer defections will negatively impact the bottom lines of major national banks in a meaningful way. It is possible, as some credit union critics have suggested, that Bank Transfer Day simply hastened the departure of unprofitable customers that Bank of America and others were trying to drive off anyway, in which case the action might actually have had the effect of increasing those banks' profitability.

If, however, Bank Transfer Day has caught the imagination of a critical mass of moderate to high-wealth individuals who decide to move not just their deposits, but also their mortgages, car loans, and more, it may well send a message to the banking industry.

Fool contributor Matt Cropp spends his spare time reading credit union board meeting minutes from the 1950s and enjoying yak puns. He doesn't own shares in any of the companies mentioned in this article. The Motley Fool owns shares of Bank of America, JPMorgan Chase, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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James Stein

Young, less-educated and low-income Americans are the worst affected by the side effects of the Fed’s rule to limit debit card interchange fees to about $0.24 per transaction, down from an average of $0.44 , we learn from a new Federal Reserve study. Joanna Stavins, an economist at the Boston Fed, tells us that:

"Because banks stand to lose revenues when the interchange fee rule becomes effective, they may raise fees – either on consumer bank accounts more broadly, or specifically on debit cards – to recover their losses."

How are they going to do that? Stavins:

"Any price changes may take the form of reduced rewards on debit cards or increased fees, either in a form of fixed term fees or as variable per-transaction fees. Fixed one-time fees are more likely to affect the adoption of a payment method, while per-transaction fees are more likely to affect the use of payment methods."

We know from other studies that young, low-income and less educated consumers are the ones relying most heavily on debit cards, partly because they have no access to credit. So at the end the issuers will manage to at worse recoup their losses, the merchants will be net winners as well and those consumers who can least afford it will be net losers from the interchange reform.

November 10 2011 at 6:34 PM Report abuse rate up rate down Reply