By: Joe Gillen
The failure of one major bank and an unpopular move by others appeared to be catalysts for credit unions in terms of the number of deposits they saw in the past few years, according to a report.
Data compiled by SNL Financial indicates there was cumulative growth in deposits at both credit unions and banks from the beginning of 2007 to 2009. However, since 2009, deposits at credit unions have outpaced those made at banks.
According to SNL, two reasons that are likely responsible for the rise in credit union deposits were the failure of Washington Mutual Inc. and the subsequent decision by Bank of America to propose a $5 monthly debit card fee. Both events drove consumers away from megabanks in favor of smaller institutions.
In addition to these possible reasons that contributed to the spike in savings at credit unions, SNL noted other banks put excessive service fees and charges in place, some related to overdraft privilege programs, to offset operating costs.
Adam Denbo, credit union consultant and managing partner at Samaha & Associates, said an increase in the number of deposits at financial institutions - and credit unions in particular - is partly the result of a change to a savings-oriented nation. Deposits at credit unions also may have increased because of the affordability these institutions can offer certain sects of consumers in comparison to banks, The Huffington Post reports.
Middle-income consumers often find credit unions to be a more affordable option compared to major banks, the news source states, as they generally have lower fees for checking accounts and other services.
Despite megabanks lagging behind on deposits, the Post states they are still stable for now, noting that the likes of JPMorgan Chase and Bank of America still have more than $1 trillion in deposits - far more than many local credit unions.