Move Your Money, But Don't Forget About Credit Unions

Horrific news surrounding the too-big-to-fail banks continues to march onward into absurdity. A rapacious Bank of America forecloses on a house that's already paid for. Goldman Sachs hides Greece's hundreds of billions in debt until the entire country is a toxic asset to the global economy. Henry Paulson baldly admits that his tenure as Goldman Sachs' CEO helped him rob American taxpayers of trillions. Media, political and financial hypocrites hilariously continue to insist that homeowners shouldn't walk away from underwater mortgages as banks walk away with cash stuffed in their high-end underwear. The frustrated public would laugh, but it'd have to pull the financial gun out of its mouth first.  

So it is with predictable Newtonian blowback that a move-your-money zeitgeist has taken hold, thanks to AlterNet's reality-based efforts as well as those of the Huffington Post and others. Yet those clarion calls for the public to transfer its cash away from grifters like Bank of America have thus far excluded the responsible and productive credit unions that serve our economy on a non-profit basis. Closing your account with a predatory behemoth is good, and there are indeed plenty of for-profit community banks out there (like the bank portrayed in It's a Wonderful Life) that would make a good home for your paychecks. But the right credit unions can provide even more punch to your pocketbook.

"Credit unions have an entirely different motivation than banks for doing business," says Patrick Keefe, spokesperson for the Credit Union National Association. "Banks are in business to maximize profit for their shareholders. Credit unions, on the other hand, are not for profit and owned by their members -- who typically belong to the credit union to obtain financial services, and affordable ones at that. So, credit unions are in business to maximize service to their member owners." 

The blueprint is simple enough. Credit unions pool their resources to offer inviting interest rates and lower fees to their members. As of September 2009, over 78 cents of every $1 credit unions held in savings was out in loans to members. The remaining 22 cents goes into bedrock-safe investments—federally insured deposits and government bonds. Nothing gets pissed away in pointless bonuses, and nothing gets invested in the Wall Street securities casino. As a result, credit unions offer better rates than banks at both ends of the spectrum—deposit accounts that pay more, and loans that cost less.

Unlike conventional banks—which thanks to the Clinton-era repeal of the Glass-Steagall Act, have been allowed to merge their investment arms to more completely fleece customers by skimming cash off the top of every transaction and funneling their money into economically damaging activities—credit unions are cooperative entities that don't hide behind labyrinthine legalese or gotcha fees.

Credit unions enjoy tax breaks as a result of their non-profit status, and those tax breaks come with some strings attached. There are significant restrictions on who can join what credit union. A New Yorker may not be able to join a credit union headquartered in San Francisco. But somewhere in your community, there is a credit union that would welcome you with open arms.

"Long story short, not everybody can join any credit union," Keefe said, "but everybody can join a credit union." 

"You can’t just walk into any credit union, plunk down some coin, and become a member," he added. "All credit unions have membership eligibility requirements, which are typically based on some sort of common bond among the members: Employees of the same organization (or organizations), members of the same social group, parishioners of a church, or residents of a well-defined geographic area, among other things. But all residents of a certain municipality, under community credit union chartering rules, could be eligible for membership in a particular credit union."