Why are more people joining credit unions?
Occupy LA protestors march through the downtown Los Angeles financial district on 'Bank Transfer Day,' November 5, 2011. Bank Transfer Day, created by the Occupy movement, is a national effort to get people to move their money from large corporate banks into smaller banks or credit unions.
Remember the "Leave Your Bank" movement that had a moment a few years ago in the wake of the financial crisis? Well, there are some signs that more people have been turning to bank alternatives since then.
The Credit Union National Association has announced that credit unions have seen a spike in membership since 2011. As of June, more than 100 million people, or about one in three Americans, are now part of a credit union.
There are a few things that could account for the growth.
Until fairly recently, most credit unions were built around a particular employer. You needed to work for the ABC Company or the XYZ School District in order to belong to the ABC or the XYZ Credit Union, explains CUNA President Bill Hampel.
These days, many credit unions are open to anyone who lives in a certain geographic area.
But there's another reason likely driving credit union's growth since the financial crisis, according to Luigi Zingales, a professor of finance at the University of Chicago’s Booth School of Business.
“People have been scared by what happened in 2008 and they now mistrust complex institutions they don't understand,” Zingales says.
Meanwhile, he says credit unions, which are non-profit and member-owned, have less incentive to invest in complicated financial products.
According to recent findings in the Financial Trust Index, a quarterly survey that Zingales co-authors, about 60 percent of American households think credit unions are trustworthy. Less than 30 percent say they trust big national banks.