Last month a protest group of hundreds of individuals calling themselves “Occupy the Dream”, gathered outside the Federal Reserve calling for economic justice. The event marked the birthday of Martin Luther King, the widely celebrated leader of the Civil Rights Movement in America of the 1950s and 60s.

At the protest the Reverend Jamal Bryant, Co-Chairman of Occupy the Dream called for anywhere between 750,000 to 1 million people to withdraw their money from large corporate banks and reinvest in small banks and credit unions. Reverend Bryant said:

“We are getting ready to infuse capital into small banks and to credit unions, and minority banks so that they can have a voice and represent the people in their communities.  America has never seen an economic revolution like what they are getting ready to see now”

What did Bryant mean by revolution? Why has the American love affair with the credit union and small financial institution grown in the economic downturn?

To put it simply, the recession seems to have led to widespread disillusionment with large corporate financial institutions and appears to have inspired many Americans to take matters into their own hands. Perhaps as a result of this new found community spirit, 2011 saw a steep climb in the number of individuals opening up accounts with credit unions.

The Occupy the Dream group are a coalition formed by the Occupy movement and prominent black clergy in the USA. The group has three fundamental demands: To increase federal grants for university education, to see an end to home foreclosures and finally, a $100 billion fund from Wall Street banks for new jobs and neighborhood investment. In other words, the group wants the big banks to give a little back, or they’ll keep their promise and take their business elsewhere.

The bank transfer day that the Occupy the Dream group called for is not the first of its kind either. A  bank transfer day called on Nov 5th appeared to ignite a wave of action with the Credit Union National Association, the largest US trade group, reporting that 650,000 people had joined credit unions across the month leading up to November, compared to 600,000 across the whole of 2010. The Nov 2011 bank transfer day was held largely in response rising bank charges.

So what’s all the fuss about credit unions? What do they offer that big banks can’t? Credit Unions are owned by their customers (or members, if you prefer), and they work as a co-operative financial institution. Members pool their money which becomes a central fund that other members can draw on for loans and other services. Credit unions are not for profit organisations and as a result tend to charge fewer fees and offer higher savings rates, although this is not always the case.

Credit unions “keep it local”:

Because credit unions operate as a co-operative institution all members will usually have a say in the way that the organisation is run, and this can result in a savings account and other services bettered tailored to the particular needs of the individuals in the credit union.

The drawbacks?

There are of course drawbacks and areas where credit unions simply cannot compare to the big banks. Large financial institutions have the size and capacity to offer a much wider range of products to customers than their smaller counterparts, who could not hope to compete in some areas.

Credit unions also tend to be a lot less accessible than large banks with membership often restricted to particular groups, professions, or geographic locations. Credit unions are also generally less technology savvy with far less emphasis on online banking. Funds kept in credit unions are often far less accessible on a nationwide basis with limited ATM access.

Credit unions vs banks, in the final round, who will win?

Many communities across the states have been hard hit by the recession, and the desire to take things back into their own hands is understandable.

If consumers do heed the call to move their savings elsewhere then perhaps larger financial institutions will take note and begin moving back towards where they started- providing a valuable service to the customer. It is unlikely that large banks will be rendered redundant due to mass desertion, but perhaps the big boys could learn a thing or two from the small time players.

John Hughes is the resident blogger at Independent Financial Advisor, a site that provides access to financial advisors as well as to debt advice charities for those struggling with their debts.

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