Banks Vs Credit Unions - How Much Influence Does the Customer Have?
With your bank, do you actually have input in the decision making processes that affect your money? Credit Unions have members, not customers, and each of them has a stake in the organization. When hard choices have to be made, they're not decided by a small group of bank executives. They're voted on by members. If you're doing business with a bank, you won't have that option.
Banks charge more fees for their services. If you're unemployed and stuck in the middle of a recession, those fees can add up and cause significant unmanageability. For many Michigan residents, times are tough and finances close to the line. It's not unheard of some bank customers losing several hundred dollars in overdraft fees and service charges. With union, the fees tend to be lower.
How much influence do you have when you're a customer of a credit union? If you don't like the way things are being run, you can present it to the board and have it put to a vote. In addition, you have a say in the opening of new branches, mergers, acquisitions, and the selection of officers. Banks don't offer you those choices.
Times are tough, and financial decisions need to be made after carefully considering all options. If you're struggling with the decision between a bank and a lending institutions, set up a list of pros and cons. On your list write down the amount of influence you have in the decision making process, and include the issues of convenience and longevity. With unions, members must approve all mergers and acquisitions. Credit institutions rarely move or change their name, and they rarely get absorbed by larger entities as many banks do. If you open an account at a credit union today, there's a good chance they'll still be there tomorrow... same name, same democratic process.
Banks charge more fees for their services. If you're unemployed and stuck in the middle of a recession, those fees can add up and cause significant unmanageability. For many Michigan residents, times are tough and finances close to the line. It's not unheard of some bank customers losing several hundred dollars in overdraft fees and service charges. With union, the fees tend to be lower.
How much influence do you have when you're a customer of a credit union? If you don't like the way things are being run, you can present it to the board and have it put to a vote. In addition, you have a say in the opening of new branches, mergers, acquisitions, and the selection of officers. Banks don't offer you those choices.Times are tough, and financial decisions need to be made after carefully considering all options. If you're struggling with the decision between a bank and a lending institutions, set up a list of pros and cons. On your list write down the amount of influence you have in the decision making process, and include the issues of convenience and longevity. With unions, members must approve all mergers and acquisitions. Credit institutions rarely move or change their name, and they rarely get absorbed by larger entities as many banks do. If you open an account at a credit union today, there's a good chance they'll still be there tomorrow... same name, same democratic process.
Small Business Lending - Credit Unions Vs Banks
One of the who-knows-how-many battles currently going on in Washington is the battle between credit unions and banks. Current law limits credit unions' business lending to 12.5% of total assets. The credit unions want that raised to 25%, and banks are fighting hard to defeat that request. The reason that this is worth watching is that credit unions that are willing to make small business loans (and many are not) often lend to smaller businesses than banks like to deal with, or lend smaller amounts than banks are willing to lend and which have all but dried up in the recession. According to government lending reports, loans to small business increased at credit unions but declined at community banks in 2009.
Looking at it from the banks' perspective, they have a couple of good arguments on their side. The best, and one that I would find hard to disagree with, is that credit unions are non-profit lending organizations that enjoy tax-free status. It was because of that that Congress imposed the cap in 1998. The banks argue, correctly, that they have to pay taxes, so the playing field is not level, and it should be. The other argument on the banks' side, although nowhere near as compelling as the tax issue, is that over the last two years, bank regulators have been beating up on banks to set aside more loan-loss reserves and strengthen their balance sheets. While this is something that should be done, it has hit community banks much harder than larger banks because their capital base is usually smaller, and it is the amount of capital on a bank's balance sheet that determines the amount of money it can lend. When a loan is classified by a bank regulator, and thus a loan loss reserve set up, that loan loss reserve is against the bank's capital even though the loan is not in default.
No matter how the battle turns out, I would argue that there is more than enough room for both to operate in the small business lending arena as long as the playing field is level. There is seldom too much money available for small business owners, and because the recovery from this recession is going to be very slow, small businesses need all the help they can get now, and there is not enough coming from banks. It is also a fact that there are not a lot of large, strong credit unions across the country competing head-to-head with banks for small business loans. Plenty of credit unions don't, and don't want to, do business lending, and it would probably take only a few defaults on small business loans at a credit union to make them swear off small business lending permanently. There are plenty of opportunities for both banks and credit unions.
Looking at it from the banks' perspective, they have a couple of good arguments on their side. The best, and one that I would find hard to disagree with, is that credit unions are non-profit lending organizations that enjoy tax-free status. It was because of that that Congress imposed the cap in 1998. The banks argue, correctly, that they have to pay taxes, so the playing field is not level, and it should be. The other argument on the banks' side, although nowhere near as compelling as the tax issue, is that over the last two years, bank regulators have been beating up on banks to set aside more loan-loss reserves and strengthen their balance sheets. While this is something that should be done, it has hit community banks much harder than larger banks because their capital base is usually smaller, and it is the amount of capital on a bank's balance sheet that determines the amount of money it can lend. When a loan is classified by a bank regulator, and thus a loan loss reserve set up, that loan loss reserve is against the bank's capital even though the loan is not in default.No matter how the battle turns out, I would argue that there is more than enough room for both to operate in the small business lending arena as long as the playing field is level. There is seldom too much money available for small business owners, and because the recovery from this recession is going to be very slow, small businesses need all the help they can get now, and there is not enough coming from banks. It is also a fact that there are not a lot of large, strong credit unions across the country competing head-to-head with banks for small business loans. Plenty of credit unions don't, and don't want to, do business lending, and it would probably take only a few defaults on small business loans at a credit union to make them swear off small business lending permanently. There are plenty of opportunities for both banks and credit unions.
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