The Easiest Way to Say 'No' to Big Bank Fees

By David Sterman

Consumers have spoken. As major banks move to stick consumers with a widening range of new fees, a revolt is underway. This Saturday, November 5, is being heralded as "Bank Transfer Day."

That's when many consumers aim to close out their accounts and take their business elsewhere. The campaign -- Bank Transfer Day, launched on Facebook -- has signed up nearly 70,000 consumers to take action (with more than 30,000 likes on the page). 

Banks have apparently woken up and smelled the coffee. JP Morgan (NYSE: JPM), for example, which operates the Chase network of banks, has quietly pulled the plug on plans to charge a $3 monthly fee for debit card users. U.S. Bancorp (NYSE: USB), Citigroup (NYSE: C), KeyCorp (NYSE: KEY) and others have also announced that they will cancel plans to start charging for debit card usage.

Yet consumers shouldn't be fooled.

With or without these debit cards, these banks still offer a bum deal. By virtually every measure, they offer consumers the toxic combination of low interest rates on their savings and obnoxious penalties for a range of infractions.

Just take a look at this table. Across the board, banks' fees and rates compare unfavorably to those offered by credit unions. 

The numbers paint a stark picture. With the exception of mortgages, credit unions offer a better deal -- across the board. Purchasing a $30,000 new car? The credit union will charge you $423 less in interest each year, or more than $2,000 less over the course of a five year loan. 

What's more, many credit unions won't charge to use out-of-network ATMs (though the bank-owned ATM fee where you withdraw still applies). Bounce a check? The credit union is likely to ding you about $15, roughly half of what most banks charge.

Get Ready for Bank Transfer Day

Credit Unions are well aware of the positive buzz that Bank Transfer Day has generated. The Credit Union National Association has initiated a marketing campaign that helps consumers understand the difference in value associated with not-for-profit credit unions versus for-profit banks.

Many credit unions are gearing up for this Saturday's consumer revolt on banks. They're increasing staff as they anticipate dozens of fed-up bank customers to walk through their doors to give Credit Unions a shot.

Dallas-based Neighborhood Credit Union is an example of a financial institution that hopes to derive long-term benefits from any potential consumer switch. According to Creditunionsonline.com, Neighborhood plans to run a series of daily themed messages such as "Power to the People" and "Value of a Dollar."

The credit union, like many others, plans to maintain the marketing push, setting up another Bank Transfer Day this coming January.

[Follow the instructions in this article to really send a message to the largest banks: Wanna Fix America? Quit Dealing with the SCUMBAGS]

What's in Store for the Big Banks?

Major banks like Bank of America (NYSE: BAC), Citigroup and others are hurting right now, posting profits that are far weaker than a few years ago. That's not the consumers' fault. Banks face tough times because of their own poor decisions, using their capital on risky investments that turned sour. 

Yet it's too soon to write banks off for good. They're likely to respond to the credit union momentum by cutting fees in coming months. 

And look for the for-profit banks to scare consumers, suggesting that customers are in safer hands at these large entities. (Small credit unions carry zero risk for most consumers -- credit union accounts are back-stopped by the same $250,000 protection that the Federal Deposit Insurance Corporation (FDIC) provides to traditional banking customers.)

Once the consumer furor dies down, though, look for banks to make another concerted push to boost costs so they can restore profit margins back up to peak levels. 

Indeed the potential loss of customers in the near-term is unlikely to seriously impact the financial results at most major banks, which collectively have millions of accounts. Still, it will be interesting to see how the banks vs. credit union battle looks six months from now.

The Investing Answer: The nation's largest banks have certainly made a lot of mistakes in the past few years and consumers are angry about it -- for good reason.

Member-owned credit unions offer more attractive interest rates on loans and checking accounts, have fewer and less penalizing fees and aim to serve the needs of their account holders, rather than a select group of shareholders. If you're interested in transferring your money, you can research your area's local credit unions by visiting the Find A Credit Union website.

[Want more reasons to leave your fee-hungry bank? Forget Failing Banks -- Save More of Your Money with Credit Unions]