Credit unions work to attract big-bank customers

Ken Rose is a Bank of America customer, but he has also done business for years with Destinations Credit Union in Parkville. Now, with the bank's announcement that it will charge many debit-card users a $5 monthly fee, the Edmondson Village resident says he plans to switch all his banking to the credit union.

"They do everything," Rose, 60, said of Destinations. "Nobody's going to banks anymore."

While that might be an overstatement, local credit unions are seizing on the public's discontent with big banks — Wells Fargo and Chase are also testing debit fees, and Citi recently announced new charges for checking accounts — to step up their marketing efforts and pull in more customers.

"For years, the whole concept of a credit union was shrouded in mystery," said Richard Williams Jr., the president of SecurityPlus Federal Credit Union in Woodlawn. "This really is an opportunity for most of us to … let people know we offer products that are equal to what large banks are offering."

Wooing individuals is key for credit unions, which are not-for-profit cooperative financial institutions that typically charge low fees and offer favorable interest rates: higher for savings, lower for loans.

"Even without banks implementing a number of fees, we're still a better deal than most of the banks out there," said Rod Staatz, president and CEO of SECU Credit Union and vice president of the Maryland and District of Columbia Credit Union Association.

Credit unions have the flexibility to work with members at a personal level, said Williams, who stressed that consumers should take the time to "evaluate their relationships" with their banking institutions.

Both bank and credit union customers should research what their financial institutions charge, said Norma Garcia, manager of the financial services program for Consumers Union.

Of consumers' increased interest in credit unions, she said, "This development seems like it's incentivizing people to do what they ought to do for every product — shop around to get the best deal."

But customers should investigate before they move, she added, saying, "Armed with the right questions, consumers can make the right decision."

Credit union officials say educating the public is a crucial part of their marketing mission.

Every credit union has its own eligibility criteria for membership. For example, most of SecurityPlus' 32,000 members work for the Social Security Administration or the Centers for Medicaid and Medicare Services. But the credit union's charter allows a broader membership, including anyone who lives, works, attends school or worships in the Baltimore area, Williams said.

While credit unions have few branches and ATMs compared to big banks, many belong to ATM networks that give members increased access and flexibility. Some credit unions, such as Destinations and SecurityPlus, also belong to cooperative networks that allow members to carry out banking errands at multiple branches.

"We're all just sort of overlapping and we're broadening our services to serve more people," said Brian J. Vittek, Destinations' president and CEO.

Just as banks have FDIC insurance, federal credit unions insure deposits up to $250,000 through the National Credit Union Share Insurance Fund. Destinations even offers additional private insurance for deposits up to half a million dollars, Vittek said.

Credit unions also offer a selection of online and mobile banking services. Later this year, SECU plans to let members make "remote deposits" by sending in pictures of checks taken with their smartphones. SecurityPlus expects to have the same capability next year.

"We're beefing up those kinds of things that we think are big-time conveniences for our members," Williams said.

But unlike major banks, credit unions don't have large advertising budgets. SecurityPlus has begun emailing members to let them know the benefits of belonging to a credit union, Williams said. Destinations aired its first cable television ad, in the Parkville area, a few months ago, Vittek said.

Although business has been difficult in recent years, credit unions have worked to keep fees low.

Destinations, a state-chartered credit union, has served a "very credit-challenged field of members," Vittek said.

"Understanding their struggles, the last thing we want to do is impose more fines or more fees for no reason other than to make more money," he said. " 'Fees' [is] almost like a bad word."

Destinations does not charge fees unless a customer has an insufficient balance or another problem that results in a charge to the credit union, and it has not increased fees in more than five years, Vittek said.

Bank of America spokeswoman Betty Riess said the bank sought to be "clear and transparent" as the debit-card fees are rolled out in early 2012. Debit cards will be free for customers with premium accounts — balances of $20,000 in multiple linked accounts, or investments through Merrill Lynch or a mortgage.

All customers can withdraw cash at the bank's ATMs for free, as well as use online banking and person-to-person transfers, Riess said. Customers can also get an ATM-only card to avoid debit fees.

Garcia of Consumers Union said that bank customers need to understand the fees that institutions charge and find out if they can take steps to avoid them by, for example, maintaining a high balance or using direct deposit.

The outlook for Destinations Credit Union membership appears to be bright: Usually, Destinations gains only about 50 new members a month, but in September 70 people joined, said Carol Szaroleta, the credit union's marketing manager.

Rose, a retired Maryland Transit Administration bus driver, is one of the union's happy customers. "You go to banks, they treat you like a criminal." But at the credit union, he said, "they treat you so good."


Credit unions vs. banks

• Bank deposits are federally insured by the Federal Deposit Insurance Corporation, while credit unions are insured through the National Credit Union Share Insurance Fund. Both banks and credit unions insure deposits up to $250,000.

• A paid board of directors makes all of the decisions for banks, while credit unions are controlled by their members, who elect their own board of directors.

• People who patronize banks are customers, while those who use credit unions for their financial services are called members.

• Banks are for-profit institutions, while credit unions are not-for-profit organizations. That means any profits incurred directly benefit members after overhead costs are covered.

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