Why You Should Switch to a Credit Union. Now.

This is how I feel about banks.
Image by David Castillo Dominici

I’m going to start with the bottom line.  We all make mistakes when tracking finances.  Yes, even you.  The thing is, when someone who has a healthy buffer in their checking account forgets to note last Tuesday’s mocha purchase, it’s not that big a deal.  You’ll catch it in a couple weeks when you get your statement, update your account, and life goes on.  Yay.

But when you are living paycheck to paycheck and your account flirts with zero on a weekly basis, these mistakes are devastating.  Let me paint you a picture of a typical payday for someone living this way:

Friday – Payday!  Money in the account!  Hurray!

• Check your budget and add up the bills you have to pay.  Not bad.  Looks like you’ll even have about a $20 buffer this week.  Sweet.
• Write the rent check.  Drop it off.
• Hit the grocery store.  Since you came in under budget, you decide to treat yourself to a fancy coffee.
• Transfer funds into savings.
• Pay the light bill.

Saturday –

• You’re at work.  You still have that buffer, and you’re exhausted, so you grab a coffee during the day.

Sunday –

• You grab a pack of gum.

Monday –

• You check your account.  Nothing has cleared from over the weekend.  Typical.

Tuesday –

• Still nothing.  Account hasn’t budged.  You snort in annoyance that the office still hasn’t deposited the rent check.  If you had waited until today to paid it, you would have gotten a notice on the door (and had to pay more fines, but they have no problem taking their own sweet time.)  Seems odd that the little payments from the weekend haven’t gone through, though.

Wednesday –

• You log in to check your account… and you’re $200 in the hole.  What the hell?

You go through your account to see what went wrong.  For starters, the damn sewer company that you have set up for automatic payment pushed through two days early.  But… wait a minute.  A closer look reveals that the payments you made went through in the following order:

• Rent
• Groceries
• Sewer bill
• Power bill
• Deposit to savings
• Coffee from Friday
• Coffee from Saturday
• Pack of gum from Sunday

And of course everything after the sewer bill got smacked with an overdraft fee of 30 bucks.  You check with the landlord.  Yup, they deposited the check on Tuesday.  But why did the coffee from Friday come through AFTER the rent check?  Looking again, you can’t help but notice that the transactions all went through in a clump… from largest amount to smallest.  If the stupid rent check had been the last to go through, everything else would have cleared just fine, and you would have only been nailed for $30 instead of $150.  Hmmmmm.

The worst part?  You’ll be starting the next payday cycle $200 short.  When you live paycheck to paycheck, that HURTS.  It means a bill isn’t going to get paid.  So you’ll have late fees.  If you have automatic withdrawal, the bouncing cycle is going to begin again. 

For the longest time, I swore that the banks were doing this on purpose.  I was assured over and over again that they were not.  Was I paranoid?

Nope.  Turns out I was absolutely right.  In fact, even though banks like Bank of America and Wells Fargo are being punished in class action lawsuits for the practice, they’re still doing it.  Just this past week, a friend was taken to the tune of about $1200 by her bank. 

Now let me tell you about our experience we had this week with BECU, a local credit union (that anyone can join, by the way).  A situation very similar to one described above occured.  When we realized it, we cringed and then watched the account miserably, waiting for the overdraft charges to come through.  When they hadn’t come through by Wednesday, I asked Gavin to call BECU to find out what they were going to be so we could account for them.  

Guess what?  There weren’t going to be any additional overdraft charges, except for the one charge on the sewer bill that went through early.  The rep explained that since the other, smaller debit transactions had been approved when there was money in the account, we were not charged overdraft fees on them. 

$25 vs. $100 in overdraft fees for this particular mistake.  Seems like a no-brainer to me.