Recent consumer backlash against Bank of America for debit card fees has raised questions about the viability of alternative financial institutions, like credit unions.
The soon-to-be $5 monthly charge to Bank of America customers who use their debit cards to make purchases is a result of the Durbin Amendment, a piece of 2010 legislation aimed at reducing the amount that merchants pay large banks for using their debit cards, said Scott Stane, vice president of strategic planning and marketing for University Credit Union, which has a branch in Ackerman Student Union.
One alternative financial institution, a credit union, is often not affected by the amendment because its assets do not exceed $10 billion, he said.
Credit unions are cooperatives that offer the same basic services as banks do ““ including checking and savings accounts, credit cards and loans ““ but at a lower cost, Stane said.
As nonprofit institutions, credit unions do not have to pay income taxes, and any money they make is put toward offering services and products at lower rates than banks, said Dean Baim, a visiting professor of economics.
Larger banks, however, are able to provide venture capital for customers interested in business loans, said Baim, who is also on the University Credit Union’s board of directors.
By regulation, credit unions are restrained to the kinds of business loans they can make, he added.
“If you come in with the idea for the next Apple computer, and say, “˜Look, will you guys give me some money,’ they won’t be able to do that,” Baim said. “Banks will have to do that.”
While credit unions are gaining popularity, many students do not know much about them because they often come to school tied to their parents’ financial institution, Stane said.
This was the case for first-year graduate student in education and Bank of America customer Andres Barajas.
“My father took me (to Bank of America) when I was 17 and just signed me up, and I’ve been there ever since,” he said.
Barajas said the debit card fee has made him reconsider where he banks, however.
For students concerned with the fees, Bank of America spokeswoman Betty Riess said the company is providing customers with choices, such as using the ATM or bringing more business to the bank to get the fee waived.
Customers who hold premium accounts, or accounts with higher balances, are exempt from this particular debit card fee, she said.
“Keep in mind, this isn’t really out until early next year, and in the meantime, if we have questions from customers, we’re talking to them to help them understand … what their options are,” Riess said.
While Barajas has heard others talk about wanting to switch banks, he said he will wait to see what happens ““ he read that other banks are considering adopting the same policies.
Lindsay Niles, a fourth-year global studies student, is a member of Teachers First Federal Credit Union through her mother.
An inconvenience with Niles’ credit union is that she is limited to one branch location for depositing checks or speaking to a representative, she said.
She said she can also only use a STAR ATM to withdraw money with no service charges, but she generally goes to Ralphs to get cash back, she said.
Other credit unions, including the University Credit Union, belong to the CO-OP ATM Network, which allows credit union members to use 28,000 ATMs nationwide free of charge, Stane said.