Bank Transfer Day, the movement that urged bank customers to close their accounts and instead deposit funds in credit unions on or before November 5, led to at least 650,000 new credit union members and a total of $4.5 billion in new deposits, according to the Credit Union National Association.
About 80 percent of credit unions in the U.S. saw an increase in accounts in October, with membership increases of 10,000 or more in 21 of the 50 states and the District of Columbia in the past month.
California credit unions saw the biggest gains, adding about 90,000 new members and $624 million in new deposits.
Texas came in second, with $326 million in new deposits from 47,000 new members.
Mary Beth King, communications director for the Credit Union Association of New Mexico, said that the association would be sending out surveys to its member institutions to gauge new numbers.
“Regardless of how many people joined credit unions Saturday, there is a big new awareness of credit unions as not-for-profit financial cooperatives owned by their members. That is the credit union difference we’ve worked to let people know about all along,” said King.
However, despite the loss of capital and customers, there are some analysts who argue that “Bank Transfer Day” was actually in the banks’ favor. How? Motley Fool columnist Morgan Housel explains (h/t Christian Science Monitor):
One of the drivers behind [Bank Transfer Day] is people trying to teach banks a lesson. The irony of that is since the financial crisis, and especially over the last three months as there has been a panic about Europe . . . banks have been inundated with cash deposits.
They’ve been seeing a higher inflow of deposits than they can turn into loans.
But how does that translate into “Bank Transfer Day” working in their favor? Apparently, the high inflow of deposits “puts pressure on their margins because banks have to pay [Federal Deposit Insurance Corp.] premiums and overhead costs.”
By removing hundreds of small-time accounts with low balances, they would actually be saving money on their premiums. Housel explains:
. . . in the past banks could earn money [from customers with lower balances] from overdraft fees and debit interchange fees and a lot of that has been scaled down through recent regulations…
People are going to be moving to credit unions, and that’s good for them because they’re going to have lower fees, they’re going to have better service, they’re going to have the feeling that they are investing in their community.
And then the banks are going to be better off because they are getting rid of their least-profitable or not profitable clients.
However, probably most important is the fact that the accounts appear to have had low enough balances that being closed did not turn into a financial nightmare for some banks.
As mentioned earlier on The Blaze, in events where customers panic and withdraw all deposits, the results can be disastrous. But this does not seem to be the case from Saturday’s protest. In fact, “despite news that the financial industry lost roughly 650,000 customers and $4.5 billion in deposits to credit unions because of Bank Transfer Day . . . some of the biggest U.S. banks moved upward today, outperforming the major indices.”
Therefore, because some of the biggest banks are moving upward on the market and that closing some of the accounts could actually save them money, in an odd way it would seem that everyone benefited from “Bank Transfer Day.”
The protesters felt a sense of accomplishment and some banks were able to offload thousands of reportedly low-balance, non-profitable accounts.
[Editor’s note: portions of the above originally appeared on Wall St. Cheat Sheet]
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Source: the Blaze