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Despite New Fees, Big Banks Do Better Online

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Experts say bigger banks have more sophisticated online services than credit unions.

The recent kerfuffle over the $5 debit card charge being rolled out by Bank of America reminded consumers of one of the worst-kept secrets in personal finance: Credit unions and small banks have much lower fees than the major banks. So why aren’t consumers walking away? Even those who campaign against big bank fees say customers have good reasons for staying put: The joys of online banking.

Web sites at credit unions are genereally less sophisticated than those at the big banks, with many lacking the state-of-the-art systems and money management services that are standard on big bank sites, according to Larry Freed, CEO of online research company Foresee, which carries out an annual online banking study. Instead, the focus is put on more traditional bill payment face-to-face transactions at the expense of online services and ATMs, Linda Sherry, a spokeswoman for the non-profit advocacy group Consumer Action, says. Most the country’s largest banks offer free online banking. “For those who want to bank online that’s a fairly good bargain,” she says.

This may explain why credit union membership has hovered at 92 million for the last three years with savings of $823 billion as of June 2011, according to the Credit Union National Association – even as banks have ramped up fees. The American Bankers Association doesn’t break out the amount of customers, but BofA alone had $949 million in domestic deposits in June.

Smaller credit unions focus more on the customer experience, which tends to be more geared toward basic online services, Freed says. “Typically, larger credit unions offer more advanced online services,” says Patrick Keefe, spokesman for the Credit Union National Association, which has over 7,000 members nationwide. “Smaller credit unions tend to pool resources and develop a solution among them that serves all of their interests.” A recent survey by the National Association of Federal Credit Unions said over 96% of their members had some form of online banking. However, Freed says expectations for services like “check capturing” (scanning and emailing checks rather than posting them) and online security alerts tend to be far higher among big bank customers. Customers join credit unions for personal service: Keefe says only 31% of customers chose them for online services.

Of course, tech-focused big banks aren’t always tech savvy. Bank of America’s site was slow and at times inaccessible in recent days, although it says those issues have now been resolved. This week, the company finally disclosed what happened: It wasn’t a third-party hacker enraged by the new $5 fee. Tara Burke, a bank spokeswoman, says it was merely the result of upgrading with “exciting” new services, but she declined to say what those upgrades entail.

Are you tempted to make the switch to a community bank or credit union?

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    • John, you are correct. Most people, and that includes well intentioned journalists and bloggers, assume small banks and credit unions can’t compete with the big banks when out comes to online banking technology. The reality is that the companies that provide banks with the computer systems that run the banks offer online banking that is on par with the big banks. Not all banks and credit unions buy into these solutions but they can. For example, there are many banks and credit unions that offer Personal Financial Management (Online Financial Management) solutions to their customers. Not all big banks do. Just ask Geezeo. Also, there are companies like BancVue that help banks and credit unions offer sophisticated products that can exceed what big banks offer.

      The advanced technology is there.

      - @dmgerbino

    • I would have to disagree. I have been customer at a few larger banks. I am now with a credit union and the online banking system is up there if not better than larger bank online systems.

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