For many Americans who face financial hardships, banking is simply out of the question due to poor customer service and outrageous fees. In its place, credit unions have been filling the void, offering a more personal banking experience and fewer fees. These practices have significantly contributed to the rise in credit union membership. According to Mike Schneck, chief economist for the Credit Union National Association, credit union membership has risen by 2.9%, adding 2.85 million new members. It was the largest increase in more than 25 years. Research has shown that this growth isn’t due to individuals leaving the banks, but the large population of individuals who simple can’t participate in basic commercial banking. Many individuals are excluded from traditional banking because they don’t meet the banks’ criteria, don’t have enough money, or may not make enough transactions in a month. These fees and requirements exclude many low-to-moderate income individuals who don’t have the money to spare, or meet the requirements to hold these accounts. Citi Bank, for example, charges their checking account holders $10 a month unless they maintain $1500 in their account or receive at least one direct deposit per month – for many people these simply aren’t options.
About 72% of nation’s 50 largest credit unions currently offer free checking to their customers, according to Bankrate’s 2014 Credit Union Checking survey. As for banks, that number dropped from 76% in 2009 to 38% in 2013. This news is also very enlightening because of the recent actions by large financial institutions to attempt to clean up their images. Bank of America and JP Morgan Chase are just two of the big banks that have developed products and educational tools specifically designed for lower income individuals.
While high fees and requirements are a large issue, they represent a much larger problem – a lack of equitable banking. A responsible banking ordinance would begin changing that by leveraging city funds for community investments by the District’s financial institutions. This ordinance would provide an incentive for community development from large institutions – a simple solution to a very critical issue.