Jim Blaine, the president of State Employees Credit Union, said that while recent media reports suggest that big banks have lost their pull with American consumers, credit unions continue to struggle.
“[Credit unions are] losing this fight despite the stories on sneaky bank fees and angry consumers,” Blaine said, according to Credit Unions Online. “Credit unions and consumer advocates are losing the war against financial literacy and consumer advocacy, and the problem with fees is that the consumers can’t get a drip on an apple to apple comparison cost. Fees are the very visible irritant, but the problem is that the consumer cannot make a comparison.
Blaine pointed to auto financing as an example of how big bank fees not immediately visible to the consumer could be misleading.
“If confronted with two ways to finance your next car, which would you choose, manufacturer or bank financing at zero percent or financing through your credit union at 2.5 percent?” Blaine said, Credit Unions Online reports. “We see what appears to be a good deal with the zero percent rate and allow ourselves to be sprinkled with the pixie dust and go with what we believe will save us money, when in reality [it] costs us more in the end.”
Blaine also said that rewards on credit cards may seem like an attractive offer, but consumers are actually paying more than they should for airline tickets and merchandise through such reward systems.
“Approximately 75 percent of our members carry a monthly balance on their credit card,” Blaine said, according to Credit Unions Online. “Everyone has the best of intentions of paying off that balance but truthfully, we typically end up carrying over the amount. What happens with the rewards and airline miles is that the banks can charge a very high interest rate on their card because there’s no usury cap. The consumer ends up paying an average of 14 percent or more every month on their balance but hey, they are getting their miles.”
Blaine said that the promise of airline miles and “toys” have taken the customer’s attention away from the fact that they are likely overpaying when they could have a credit union-issued credit card protected by a usury cap.
“Credit unions cannot charge a higher APR than 18 percent on loans,” Blaine said, Credit Unions Online reports. “We don’t offer any exciting rewards but when the member carries over that balance next month he or she is only paying seven percent versus the much higher rate that their friends pay at the bank—for their miles.”
Additionally, Blaine said that bankers are like deer hunters searching for their prey.
“It’s actually not fair,” Blaine said, according to Credit Unions Online. “The banks are like a deer hunter; the one with the gun who knows he’s out to hunt, whereas the consumer is like the deer. We don’t even know we’re playing and are in the wild unarmed. They tell their customers to take the overdraft privilege under the guise that they are taking care of you. Meanwhile, the consumer ends up going for that cup of coffee that ends up costing him $35.”