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Do You Really Need A Bank?

Consumers who want to fire their bank have alternatives

By Mark Huffman
ConsumerAffairs.com

August 12, 2009

Tina, of Denver, Colorado, expressed it recently in her complaint about the sudden increase on her Chase credit card.

"I have had it with these people," she told ConsumerAffairs.com. "When the economy rebounds and even before so, let's revolt, people! We can find trustworthy, reputable companies to work with. We the American people do not deserve this treatment."

Is it actually possible for Tina, and others who feel as she does, to exist in 21st Century America without doing business with a bank? Maybe, because there do appear to be some alternatives.

Yahoo! personal finance columnist Laura Rowley says consumers ticked off about excessive overdraft fees and sky high credit card rates should consider ditching their checking account and put all their cash into a prepaid debit card.

"Users direct-deposit their paychecks onto the cards (the money is FDIC-insured) and can do point-of-sale transactions and pay bills online," she wrote in a recent column. "There are no overdraft fees; the purchase is declined if the card is empty."

If going that route, consumers should research prepaid cards carefully, because some come laden with fees. However, many have fees that amount to only $70 or $80.

More practical

Credit unions may provide a more practical alternative to banks, providing many of the same services but without the policies that seem to drive consumers up the wall. They tend to charge customers, or "members," lower rates when they borrow money and offer higher rates on their savings. Like banks, most are federally insured.

Credit unions began in 1844 in England, and first appeared in the U.S. in 1908. They are cooperative organizations, "owned" by their members, or customers. That means they don't have to show a profit and provide dividends to shareholders - because there aren't any.

Credit unions also tend to be more stable. Since they are membership organizations, they aren't sold and rarely merge with other financial institutions. Some member find that gives them a feeling of safety and security they don't get with a bank.

How do you join a credit union? It's not quite as simple as opening an account at a bank, which may be why more consumers aren't taking advantage of them.

While anyone can be a member of a credit union, the law places some limits on the people they may serve. A credit union's charter defines its "field of membership," which could be an employer, church, school, or community. Anyone working for an employer that sponsors a credit union, for example, is eligible to join that credit union.

In recent years, individual credit unions have been able to expand their "field of membership" to include wider sections of the population. For example, the Virginia Credit Union was originally established to serve state and county employees. But membership has been expanded to people who work for state-supported colleges, some Virginia-based companies, and "individuals who live, work, worship, volunteer or attend school within the boundaries of" the City of Richmond and six other Virginia cities and counties.

The Credit Union National Association offers assistance to consumers who are searching for a credit union they can join.

Meanwhile, federally insured credit unions totaled 8,100 at the end of 2007, with 86,837,478 members, according to the National Credit Union Administration, a U.S. Government agency.

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