Credit Unions are on the Rise

The LA Times has an article out detailing the rising popularity of Credit Unions. These are the not-so-flashy financial institutions that strive to provide basic and affordable financial services to their customers. Some credit unions continue to look and feel like financial cooperatives, which offer financial products based on membership and affiliation. Others function more like nonprofit banks; without shareholders, their primary objective is to meet the financial services needs of the customers and communities. 

And last year, it seems like their popularity spiked. The National Credit Union Administration reports that more than 1.3 million Americans opened new credit union accounts last year, up from less than 600,000 in 2010. There are now almost 92 million Americans that have credit union accounts, with almost one trillion dollars in assets. This is still a fraction of the $12.6 trillion moving through the nation’s banking system, but it seems like the credit union share is destined to grow further.

With growing pressure on the big banks to keep up their bottom line, there may be attempts to increase fees on basic services and products. For instance, Bank of America proposed a monthly fee on some of their debit cards, before pulling back the proposal after hearing from consumers. I’m actually not against fees per se, I just want them to be fair and transparent. What we need to avoid is hidden fees or ones that are needlessly burdensome (yes, I’m looking at you Mr. $35-a-shot Overdraft Fee). If credit unions can offer the basic financial services that are convenient, reliable, and affordable, they should continue to see their market share grow. If some of the larger players can compete on service and price, the more the merrier. But banking should not be risky or exciting. For most people, it would be fine if there bank was simple, boring, and cheap. And remember, in theory, when banks compete, you win. If credit unions can help foster this competition, we will all be better off.