(Guest post from Jon Robinson of debt.org)
While you may be able to control where you put your money – stocks and bonds, real estate, money market funds, etc. – you usually have less control as to how your money gets used.
For example, if you put your money into a commercial bank, the bank can do whatever it wants with
your dough in return for the small amount of interest you receive on your deposit. In the past, your bank
might have loaned some of your money to a promising local business venture with the intent of making
a profitable return on a new company’s creation of value to your community. Those were the good old
Today, it’s just as likely that your money will be used to underwrite the lavish lifestyles of your bank’s
executives, or to help it acquire any number of complex and risky financial instruments. Remember, the
bank is in the business of making a profit – not for you, but for itself.
Your deposit is merely seed money the bank uses as investment fodder, just as it uses the paper assets
it creates when it makes a loan. And as we’ve seen, when the bank’s investments go bad, as many
did during the recent financial meltdown, we’re forced to bail them out with additional amounts of
our money. (And hey, it’s not like we’re going to force the banks into debt settlement. Better to be
Lots of folks finally got fed up when even after the banks got bailed out, they decided that they were
entitled to even more of our money by announcing they were planning to increase fees on our debit
card use. That’s when the collective outrage of the populace boiled over and people decided to exert
some control over their funds.
In 2010, more than half a million Americans fled their commercial banks and opened credit union
accounts. In 2011, it was another 1.3 million. Today there are more than 91 million credit union
members with $960 billion in the nation’s 7,400 credit unions.
Credit unions are non-profit financial institutions that offer services similar to banks, but exist to serve
their members, not to make money off your money for their own benefit. And because they are
owned by their members, credit unions’ savings accounts generally offer higher interest rates than banks, while credit unions’ loan and credit card rates are usually lower.
I switched all my family’s deposits into a credit union last year and haven’t looked back. When my local
banker asked me why I was moving my money, I gave her some history and some numbers: “You’ve
been making money on my money for 19 years, yet you needed $3.5 billion in bailout funds because
you failed to use my money wisely. Even so, last year you made a profit of $179 million while your CEO
walked away with a $10 million paycheck. Now, you want to charge me $5 per month to use my debit
card. I guess I’m just not feeling the love.”
Yes, I’m just a small time depositor and my bank won’t miss me. But the aggregate effect of the few
million teed-off consumers just like me who took the time to close our bank accounts and go down the
block with our deposits forced the big banks to reverse course on their proposed debit card fees.
The bottom line – I’ll save few bucks, but that’s not the biggest payoff. What really feels good is that I
took some control of my finances and sent at least one big bank a big message: “It’s my money you’re
playing with. But since you won’t play nice, I’m outta here.”