The Federal Deposit Insurance Corporation (FDIC) reported that 7.7 percent or just under 17 million American adults, do not have an account with a bank. The data suggested that Americans have refrained from creating an account with a bank for numerous reasons. They don’t have the money, they don’t have trust for banks, the account fees are too high and they have concerns about privacy.
Although it’s quite a relatively small number in the United States, it still lags behind other industrial nations, including Australia, Canada, and the United Kingdom. Some say it’s a matter of income inequality, others say it has more to do with racial matters.
What the experts are possibly omitting is the fact that credit unions are winning people over, particularly the millennial generation, an age demographic that is presently defying conventional logic.
Credit unions are not-for-profit institutions owned by members and offer inexpensive checking, credit, savings and other financial services. These organizations are usually marketed towards low-income individuals, minorities, immigrants, and youth.
Studies have continually highlighted that credit unions offer the best deals on checkings and savings accounts. According to a WalletHub study, the fees charged to clients are 70 percent less than what conventional banks charge while interest savings rates are around 10 percent.
A part of the reason why millennials are flocking to credit unions is the fact that they are affordable and don’t necessarily maintain some of the business practices that millennials abhor - anyone remember the global Occupy Wall Street movement? In addition, millennials are known for wanting to support local businesses, but at the same time they want to enjoy many of the features, perks, and services that large corporations have.
This is where credit unions come in. In recent years, credit unions have upgraded their technologies, customer service and products to entice customers, especially the millennial market. For instance, numerous credit unions offer free classes on buying homes and managing money, and workshops on entrepreneurship. As well as modern features like online banking and remote deposit.
According to Inc. Magazine, credit unions are a perfect fit for millennials:
"Innovative tech products and creative programs like these are drawing millennials away from big banks. And as community-based, member-owned businesses, credit unions are perfectly positioned to appeal to millennials. Entrepreneurial and independently minded, millennials care about the world around them and are characteristically more tech-savvy, more well-informed, more product-driven, less brand-focused, and more civic-minded than their predecessors."
The millennial generation will soon to transform into a tsunami of consumers unseen since the Baby Boomers. When this happens the 18-to-34 demographic will have such sway that banks may be forced to modify some of the ways they do business, such as lowering account fees, changing investment options and eliminating dubious charges.
However, there are other features than just goodwill that are attracting millennials:
Higher interest rates
Lower credit and loan rates
More account flexibility
Fewer account complications
Greater focus on customer decisions
At the same time, the paucity of locations and fewer account options could be the last barriers for credit unions to overcome to gain a higher number of clients.
Unfortunately, for proponents of credit unions, the various features that these institutions offer may not last. It’s important to note that a part of the reason why credit unions are able to provide these benefits is because they do not pay taxes like a traditional bank. That may change since it has been proposed to coerce U.S. credit unions into paying a tax. This could affect 96 million people.
For now, credit unions could be the last refuge for those wanting to stay away from the status quo.