December 11, 2011

Credit Unions versus Banks : Not Exactly Win versus Fail

One of the recent trends I've seen is bashing of mega banks on one hand and blind gushing praise of credit unions on the other hand.   The way people talk you'd think that credit unions are miles ahead of large banks in terms of service and offerings.

Surely credit unions do a better job as a whole in the area of customer support and many large banks have poor service.   If you generalize its easy to conclude credit unions are better.  But.. its not as if credit unions are perfect and never have flaws.   I myself quit a credit union years ago cause they started charging stupid fees that banks didn't charge.  Kind of ironic that is the exact reason many people are switching away from banks today.  

According to a large survey of over 6000 customers done by  PrimePerformance the satisfaction levels with banks is lower than credit unions, but not by a huge amount.   They found :
" 88% of customers at Credit Unions and Small Banks were satisfied with the service they received; only 1% of Credit Union and 2% of Small Bank customers were dissatisfied. Large Banks and Wells Fargo both ranked in the middle with 78% of customers satisfied and 4% dissatisfied. 74% of Bank of America customers were satisfied, with 4% dissatisfied."

As a group credit unions and small banks are 10% ahead of large banks.   Thats significant.  But we're talking about a 10% gap in satisfaction not a 90% gap.    There are still 12% of credit union customers who are not satisfied.    Thats a pretty significant minority don't you think?   I mean 88% is a B grade not an A+.  

You also have to consider that not all credit unions are created alike.  As a large group the satisfaction levels are high but there are certainly going to be individual credit unions that have lower customer satisfaction than large banks.   There are thousands of credit unions with different management and widely varying quality levels.   The average credit union may provide better service than the average large bank but that doesn't mean that every credit union will perform better than every bank.

If you look at the detailed study from PrimePerformance you can see something interesting in the regional break downs.   In the Southwest region including Arizona, New Mexico, Oklahoma and Texas the credit unions don't have as many happy customers.  Credit unions in the Southwest US states have lower satisfaction ratings than large banks and small banks.  Southwest credit unions had a 83% satisfaction rate there versus 92% for small banks and 85% for large banks.    In the Western states the credit unions also fell behind small banks.   There credit unions had 85% satisfied customers versus 89% satisfied customers at small banks.   

In California credit unions do better than banks in broad satisfaction survey as well.  But if you look at the detail in a PrimePerformance survey on California market specifically you'll see the top rated credit union there actually had more customers with problems than several megabanks.   The percent of customers with problems or complaints in the past 12 months was 18% at Golden 1 Credit Union.   That was beat by Bank of The West and Union Bank both at 12% as well as Wells Fargo and U.S. Bank who had 17%.  To be fair, Golden 1 Credit Union did better in all the satisfaction ratings so they have more happy customers.  But its notable that they do have more customers who've had problems than many large banks.   Maybe the credit union customers are more forgiving of problems.

Of course I'm not arguing that credit unions are bad.   There are a lot of good credit unions out there that do a great job.   As a group they have higher satisfaction than any of the major mega-banks.     My point is that credit unions aren't infallible and their performance isn't really miles better than a typical large bank.  Individual credit unions may very well be worse than the large banks in their customer satisfaction.  Even the credit union with the highest satisfaction rating in California has nearly 1 in 5 customers with problems and complaints.

Bottom Line : Credit unions may do better than banks as a whole, but credit unions aren't all awesome.

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