Why I switched to a credit union from a big bank and why you should too

Neal Gorenflo is the executive director and co-founder of Shareable, an award-winning news, action, connection hub for the sharing transformation.

After 20 years at Wells Fargo, I switched to Meriwest Credit Union last weekend. There are many reasons why I left Wells Fargo, but the top reason is this — I don’t trust them. I simply couldn’t justify staying with a bank that has a long history of fraud. The main asset of a bank is trust. This is the place where you put your hard-earned money. You need to trust your bank. I didn’t trust Wells Fargo, so I left. 

A decade of massive fraud

My departure from Wells Fargo is long overdue. I began to doubt them back in 2010 when they were fined $200 million for a practice designed to generate excess overdraft fees, which also disproportionately impacted low-income customers. This was a low blow, taking money from working people struggling to make ends meet. It’s the financial equivalent of kicking a person when they’re down.

This had my resentment on a long simmer, but I didn’t leave. Because I traveled frequently, I wanted the full range of services and geographic coverage that a big, global bank offered. Plus, all of my personal finances revolved around Wells Fargo. I had direct deposit from my employer, automatic bill pay for key expenses, a debit and credit card, checking, and a retirement account. I thought it would be difficult to change banks.

However, my resentment came to a boil over the recent fake account scandal. From 2002 to 2016, Wells Fargo employees opened unnecessary accounts for customers due to impossible sales quotas imposed by top executives. As the NY Times reported, “they opened millions of accounts in customers’ names without their knowledge, signed unwitting account holders up for credit cards and bill payment programs, created fake personal identification numbers, forged signatures and even secretly transferred customers’ money.” Wells Fargo agreed to pay $3 billion in penalties for their crimes.   

And this isn’t even their largest fine. Wells Fargo was fined over $5 billion in 2012 for their illegal mortgage lending practices. They were one of a dozen or so banks primarily responsible for the subprime mortgage crisis of 2007-2010. Remember that these practices, widespread at major banks like Wells Fargo at the time, triggered the Great Recession and cost around 10 million Americans their homes. All told, these banks paid a staggering $243 billion in penalties related to the subprime crisis.

In a NY Times story about the more recent fake account scandal, Nick Hanna, U.S. attorney for the Central District of California, is quoted about the case, “Wells Fargo traded its hard-earned reputation for short-term profits, and harmed untold numbers of customers along the way.”

Big banks serve investors, not depositors

Hanna’s statement almost says it all. However, it leaves out an essential truth about big, publicly-traded banks — they’re perpetually prone to fraud because they face intense pressure from investors to grow profits quarter after quarter. 

It doesn’t help that executive pay is often tied to stock performance. In this latest case, former Wells Fargo’s CEO John Stumpf agreed to pay a $17.5 million fine as the result of a separate investigation into the individual roles of executives in the sales practices fraud. 

A CNBC article said he, “had certified in 2015 and 2016 investor disclosures that touted the firm’s supposedly robust ‘cross-sell’ metric, despite knowing it was misleading.” In other words, his policies pressured employees to create fake accounts, he allowed this practice to continue for nearly a decade, and then he knowingly used the fake performance data to pump Wells Fargo’s stock price to enrich himself — all at the expense of millions of working people.   

Because of this accumulation of crimes, I left Wells Fargo. Because big banks like Wells Fargo are prone to fraud, I will likely never use one again.

Three reasons why I chose a credit union as my next bank:

  1. Credit unions are nonprofit financial cooperatives that exist to serve their member-depositors. Instead of being owned by distant investors, credit unions are owned and governed by depositors like you and me. Credit unions feel no pressure from stockholders to grow profits forever. In fact, profits are returned to members in the form of better rates and fees. Structurally speaking, this is a system I can trust. The interests of credit unions are aligned with my interests, all by design. They’re also better for the local economy.
  2. Credit unions are safer. Banks get into trouble when too many of their loans go bad. For-profit banks are prone to more risky lending, as in the case of subprime mortgages, because of the pressure they feel to continually grow profits. As local nonprofit institutions, credit unions are prudent lenders. They generally know their customers better than big banks and don’t feel pressure to make risky loans. Their performance during the subprime crisis is a testament to their stability — they didn’t increase their subprime lending in the run-up to the crisis and therefore had far fewer failures than traditional banks.
  3. They’re a better deal for ordinary depositors like me. They may not have all the bells and whistles of a big bank, but generally speaking, they offer higher savings rates and lower fees and loan rates. For instance, I was earning a typical big bank rate of .01% at Wells Fargo on money in my checking account versus my new rate of 2% at Meriwest. That’s 20 times better!

I also got nearly everything I had with Wells Fargo including federally insured deposits, free checking after meeting a reasonable minimum deposit, debit card, online and mobile banking, automatic bill pay, and more. While credit unions are often geographically limited, they make up for it by working together. A national network of credit unions gives customers surcharge-free access to 30,000 ATMs across the U.S. plus 10 other countries. The only thing Meriwest didn’t have is Zelle for sending money via mobile phones, but they have a similar service. 

Wells Fargo undoubtedly has other services that Meriwest doesn’t, but I don’t need them. For core banking services, Meriwest has me covered. My experience matches up pretty well with other articles analyzing the pros and cons of credit unions, but I encourage you to do your own research.  

Switching to a credit union was easy

My fear that switching banks would be difficult turned out to be totally overblown. I was able to do everything online in about an hour. These days there’s no need to even visit a branch office. 

How did I pick Meriwest from other credit unions in my area? Meriwest is the nearest credit union and it offers the best savings rate. That made my choice easy. I also met the eligibility requirements, which like most credit unions are fairly broad. You should have no problem finding a few credit unions in your area that will take you. While my search was easy, yours could be too if you use this credit union locator tool

So don’t drag your feet like I did. If you use a big bank, switch. It’s easy, you’ll sleep better at night, you’ll join nearly 300 million credit union members worldwide, and your wallet will be much happier too.

Neal Gorenflo is the executive director and co-founder of Shareable, an award-winning news, action, connection hub for the sharing transformation.

This article is republished from Shareable under Creative Commons license. Read the original article here.

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