Credit Union Difference
10 Reasons Millennials Choose Credit Unions/ February 5th, 2016
I can't remember the first time I joined a bank.
Banks have come and gone numerous times in my life, each one about as memorable as switching wallets, but I remember joining my credit union. I've found most people do. Often because joining a credit union was a game changer—the exact point their financial lives took a big turn for the better.
This is particularly true of millennials. Millennials—generally defined as anyone born between 1980 and 2000—are more likely to recommend credit unions than banks to their friends. A survey by CO-OP Financial Services, Cucamonga, Calif., a financial technology company for credit unions, found that 96% of millennials were either very satisfied or somewhat satisfied with their credit unions, and 81% of millennials felt their credit union provided outstanding customer service, compared to just 59% of young bank customers who felt the same way about their financial institution.
Of course, the majority of millennials bank with, well, banks. But when they discover there's an alternative, it can feel like kismet. That's certainly how I felt when I joined my credit union, anyway . This got me to thinking about why, exactly, do credit unions and millennials seem like an ideal match?
After discussing it with a couple of young people in the credit union movement, here are the 10 reasons I came up with.
1. Credit Unions Are Not Banks
Maybe it's not like this for everyone, but my relationship with banks always felt vaguely adversarial. I rarely contested fees because I feared either there wasn't enough money in my checking account or my credit score wasn't good enough to make me matter in the bank's eyes. So I avoided contacting them whenever possible.
I'm in good company. A recent study of 10,000 millennials found that four of their most hated brands were banks.
Four years ago, Kristen Christian, who as a cooperative activist is always thinking about credit unions, became so disgusted by the way Bank of America was nickel-and-diming its customers she created a Facebook event called Bank Transfer Day. Soon 54,900 of people had liked the Facebook event, contributing to more than 2.2 million new credit union members for the 12-month period encompassing Bank Transfer Day.
"People were angry," she says. "So many Americans don't want to sit around complaining and waiting for the world to change." She wanted to channel that anger into something positive. "The alternative (to complaining) is saying, 'You don't like the big banks?' Great, join a credit union."
2. "People Helping People" Is the Credit Union Motto
This is, personally, my favorite thing about credit unions—that they're committed to helping you. It's the whole reason credit unions exist! Here, I'm just going to quote directly from the Credit Union National Association, the trade association for credit unions: "Credit unions exist to help people, not make a profit. Our goal is to serve all of our members well, including those of modest means—every member counts."
In other words, at a credit union, it's not the amount of money you have that determines if you'll be treated fairly. This doesn't mean credit unions will just give you a loan and not hold you accountable for paying it back. Credit unions have to generate revenue to stay viable, but they're also not going to take advantage of you.
3. Credit Unions Are Not-For-Profit
A millennial herself, I ask Christian how she persuades young people to join credit unions today.
"The funny thing is I don't have to persuade them," says Christian. "I just tell them what a credit union is. Every young person I meet, the idea of a credit union is just so in line with their beliefs. The biggest selling point is that credit unions don't operate to make a profit. So they're like, 'Oh they're charities,' and I tell them, no, we operate like any business, but at the end of the year, we don't keep the profit. We put it back into the community.
She's right. This is one of the biggest reasons credit unions and millennials are a natural fit. Credit unions return profits to their members, often through better loan rates, fewer fees, and perks like surcharge-free ATMs. Despite being saddled with more student debt than any generation in history, millennials have proven to be one of the most giving and to value organizations that are not driven solely by the pursuit of profit.
It matters to millennials that the businesses they support are ethical and community-minded, and credit unions have proven to be both of those things.
4. You're a Member, Not a Customer
Credit unions are financial cooperatives, which means they're owned by the people who bank there. Credit unions offer saving accounts, debit cards, and loans just like banks do, but at a credit union the money you deposit—no matter how paltry—makes you a partial owner or "member."
5. Credit Unions Are Part of the Original Sharing Economy
Millennials have helped spur a new economy that sidesteps traditional businesses by renting out something they're not using—a house, apartment, or car, for instance—for use by others. This model helped make start-ups such as Airbnb and Uber quickly and massively popular—to such a degree that the hotel and taxi industries have been going after them in court.
Credit unions began as a way for people without access to traditional banking services to pool their money and make loans to each other. If banks wouldn't lend to them, the thinking went, then they would lend to each other. In America, credit unions took off during the Great Depression when banks began failing, and they've been helping Americans take control of their finances ever since.
6. Credit Unions Are Local
Millennials have grown up with the local movement—the idea that you should eat and shop locally whenever possible as part of a lifestyle that helps keep your communities vibrant and healthy. With banks, up to 97% of the money you deposit can leave the community.
"At a bank, your savings could go anywhere," says Amaia Stecker, CUNA's social media manager for A Smarter Choice, a website aimed at connecting consumers with credit unions in their communities. "By saving your money in a credit union, you're able to support other people in the community with their goals and dreams and desires."
In other words, your deposits could be part of a loan that helps a local teen buy her first car or a family their first home or an entrepreneur set up a small business. I'm guessing that for most millennials this is probably more meaningful than a bank rolling your money into a collateralized debt obligation or some other byzantine financial product.
7. Credit Unions Are Committed to Financial Education
When my wife and I joined our credit union in early 2012 we were in that transition phase from the fly-by-the-seat-of-your-pants finances of our 20s to the more diligent mindset of actual adults who pay bills on time and don't pronounce IRA (individual retirement account) as if it were someone's first name. Our credit union helped us get there.
Numerous studies have found that millennials struggle with personal finances—here's a recent one—so it's especially helpful for us that part of a credit union's operational philosophy is financial education. Education is one of the seven cooperative principles credit unions follow.
8. You Can Trust a Credit Union
Knowing that credit unions operate for your best interests takes a lot of the anxiety out of making financial decisions. A recent survey found that twice as many respondents found credit unions trustworthy compared with banks.
"The level of trust that's there, I just feel so safe with my credit union," Christian says, recalling the time a credit union employee volunteered to make a home visit to her mother, who couldn't get around well enough to come in to the branch. "Anything I need, I know they'll help me."
9. Many Credit Unions Offer the Same Perks as Banks
Stecker says the stereotype exists that credit unions are quaint—something your parents might have used. But credit unions have changed with the times.
Services vary depending on the size and resources of the credit union. "There are credit unions with all different kinds of capabilities, and every credit union is different, which is what makes them unique and able to serve members so well," Stecker says. "You just have to find the right credit union for you."
Many credit unions have robust mobile banking platforms. Some allow paper check deposits by submitting a photo of the check on your phone. Which is good, because 90% of millennials report using online or mobile for their everyday banking needs.
Christian says once credit unions adopt mobile banking en masse, she believes millennials will switch to them in droves. "I really think it\'s technology," Christian says. "We need to have streamlined online banking, online bill pay, and remote check deposit."
10. Credit Unions Are a Better Deal
Credit unions generally offer better loan rates, credit cards, and fewer fees than banks. The average lifetime savings for someone using a credit union in Wisconsin, for instance, is $117,000.
"To a certain extent it's always better to get a better deal, but social responsibility, the idea that you're actually contributing to something and helping your neighbors, matters more," Stecker says.
All the other perks of credit union membership? They're just icing.