Should Millennials Join a Credit Union?
Millennials have a big impact on the financial landscape as they are quickly becoming America's largest generation. There are roughly 80 million millennials, Americans who were born between the early 1980s and the last 1990s. While millennials love their avocado toast and brunch, there's one thing they don't like - banks. Four of the ten least loved brands by millennials are the nation's leading banks, according to Viacom's Scratch Millennial Disruption Index. Should millennials join credit unions instead?
According to a survey from the FDIC, 30% of people don’t have a bank account because they don’t trust banks. Another 25% said that the fees are too high. Credit unions are a great alternative for millennials with these concerns. While credit units are a type of financial service provider, they’re not banks. Banks are for-profit institutions that are owned by shareholders. Credit unions, by comparison, are not for profit institutions owned by the members of that credit union.
The goal of credit unions isn’t to make money. They’re not a financial institution in the traditional sense. Instead, credit unions seek to address the financial needs of their community. They’re member-owned so they don’t have to answer to outside shareholders.
Better Customer Service
Credit unions have a reputation for being more customer-friendly. Because credit unions are smaller, they’re often more connected with their customers and are able to deal with customers on a personal level. Large banks often have such a complicated corporate structure that branch managers may not have the authority to help and the people that do have the authority are unreachable for the average consumer.
Bankrate’s 2018 Credit Union Checking Survey found that 82% of the largest credit unions offer completely free checking accounts. Meanwhile, only 38% of banks offer free checking. Truly free checking accounts don’t have any deposit or transaction requirements to avoid paying a monthly fee. Credit unions that do have a threshold––only 8% of those in Bankrate’s survey––to avoid a checking account fee tend to have lower thresholds compared to banks.
Credit unions also charge lower overdraft and ATM fees. For example, the average overdraft fee for a credit union is $28.20 compared to $33.38 for banks.
Better Interest Rates
Credit unions often have better rates on savings accounts and CDs. Millennials keep more of their assets in cash than any other generation, which means it’s important to park cash in a place where it’s safe from market fluctuations but also can get decent returns. Credit unions aren’t concerned about passing off profits to shareholders so they can offer better rates to members instead.
Not only do credit unions offer better yields on savings accounts, but they also offer lower interest rates on credit cards and loans.
Fewer Branches and ATMs
One drawback of credit unions is the limited availability of branches and ATMs. This can make it difficult if branches aren’t located near you and you need to talk to a person face-to-face about a financial product or if you need to withdraw cash from your account without paying a fee. Some credit unions are members of a network of ATMs which may allow you to avoid withdrawals fees. Otherwise, you may have to find another way to get access to cash.
Credit unions may also lack robust online and mobile banking capabilities that large banks tend to have.
While you may not have to jump through financial hoops to open an account at a credit union, you will have to meet some requirements to become a member. The requirements vary depending on the credit union. For example, you may have to be a resident of a certain area, a member of a professional organization, or an employee of a specific company.
Millennials looking to become more financially literate but aren’t quite ready to talk to a professional financial advisor may be better served by a credit union. Credit unions often hold seminars on a variety of financial topics to help members become better with their money. These seminars are often free and aren’t a sales pitch for a financial product.
Millennials aren’t locked into choosing one or the other. There may be cases where having an account at a credit union and a bank is the best solution. The key is to decide what you’re looking for from a financial service provider and choose the institution or institutions that will best help you accomplish your goals.