A generation steers toward credit unions, away from banks
They graduated and came of age just as the economy had sunk to its deepest depths. Their job prospects and savings accounts dropped. Then, if they had recently bought a home, they watched helplessly as its value evaporated – perhaps pushing them into foreclosure.
And it hurt.
Millennials suffered deeply during the recession, with wounds that are still fresh and unlikely to heal quickly.
Now an unlikely industry is aiming to capitalize on those financial scars to attract new customers: credit unions.
“I think Millennials choose credit unions because they connect to it, because they connect with the mission,” said Gary Vien, Chief Administrative Officer at Suncoast Credit Union.
Credit unions are aggressively steering marketing efforts toward the Millennial generation. They are blunt in pitching the sector’s non-profit status and arguing its fees and interest rates are lower than profit-minded banks.
The sales pitch might be working. According to the Credit Union National Association, credit union membership surpassed the 100-million mark this summer.
Larissa Dias-Lizarraga is a perfect example. She said she banked at a traditional bank – a “too big to fail” bank – for 10 years before she switched.
“Immediately, I felt the difference,” she said.
Dias-Lizarraga, a teacher, said mounting fees frustrated her. But she also felt a philosophical pull to defect.
“Our generation and the credit unions share a lot of values,” she said.
That sentiment makes Vien smile — and become a bit coy.
“We wish the banks well,” he said.
But even with 100-million members, credit unions’ footprint remains far smaller than traditional banks.
For example, for each credit union location in the U.S., there are 14 bank branches. And even Vien notes that credit unions control a mere six percent of deposits.
“The banks control the other 94 percent,” he said.
Still, Vien and other credit union administrators are confident a demographic swing is underway and that the next generation of financially-savvy adults will require more from their financial institutions.
“It means the banks have to pick up their game,” he said.
But that has not happened just yet.
We compared common fees, such as ATM fees, overdraft fees, and money order charges, among three credit unions and three large banks. We discovered a wide gap.
Fees varied, but the general trend was clear: in all six categories, a credit union offered the lowest fees; and in five categories, a bank offered the highest fee.
It’s imperative that customers shop around for the best banking deal. Also pay careful attention to variable fees, such as monthly maintenance fees — which both banks and credit unions charge.