Long before Occupy Wall Street protesters were doling out Big Bank Haterade, Main Street customers were steadily moving their money out of banks and into credit unions, a new study shows.
Deposits at the biggest credit unions have grown at a faster rate than those at the biggest banks since the beginning of the financial crisis, according to a study by financial research firm SNL Financial published this week. Since 2008, deposits at credit unions have risen 43 percent compared to a 31 percent increase at the biggest banks.
The collapse of Washington Mutual and its purchase by JPMorgan Chase in 2008, and Wells Fargo's acquisition of Wachovia kicked off an increase in deposits at credit unions, the survey said. Deposits at credit unions spiked again last fall, when Bank of America tried to add a monthly $5 fee to use its debit cards, according to the report.
And it doesn't appear that big banks really want to stop the exodus of pocket-change customers.
Bank of America has been on a cost-cutting bender, recently axing ATMs from malls, grocery stores and gas stations -- making it a lot less convenient for Main Street customers.
This summer, Wells Fargo has phased out its free checking (a holdover from Wachovia) and its rewards program on debit cards. Other big banks have been hiking fees on services including, overdraft fees and monthly maintenance costs.
Meanwhile, small- and mid-sized banks -- another alternative for mom-and-pop customers and small businesses -- have closed their doors. Key Bank, a mid-sized bank in the Midwest, said it plans to close around 50 of its 1,000 branches, American Banker reported. It is not alone. Bank closings are significantly up this year, as smaller institutions struggle with low interest rates and weak loan demand, along with compliance costs for regulations.
Part of the gap is made up by online and mobile banking, but credit unions also are trying to leverage bank churn to attract even more customers. For example, McGraw-Hill Federal Credit Union, a New York City institution with $290 million in deposits, has created a video campaign asking potential customers to make video testimonials about their big bank departure in a program dubbed "We Hear You."
Credit unions tend to be cheaper alternatives for middle-income customers, with lower fees on everything from checking accounts to overdrafts.
But even as customers continue to move their money to credit unions, big banks don't have too much too worry about. The total amount of money on deposit in Wall Street banks still massively outweighs even the richest credit union. The Navy Federal Credit Union has a mere $35.5 billion deposits -- compared to JPMorgan Chase and Bank of America, which both have more than $1 trillion in deposits.