When 33-year-old Chris Kummer wanted more flexibility in managing his finances, he switched from a bank to a credit union. That was three years ago. Today, the Seattle resident remains a steadfast convert.
“I will never go back to a big bank,” he said.
He’s not alone. Between 2013 and 2014, nearly 2 million millennials made the switch from big banks to community credit unions. For many, the move came as a result of the 2008 financial meltdown. The difficult economic climate left young people struggling to launch into adulthood, already burdened by massive student loan debt and poor job prospects.
These circumstances continue to frustrate millennials, though many of the youngest generation continue to use big banks—often because they simply don’t realize there are alternatives available.
But what makes credit unions a preferable alternative? It’s not just that they save their customers money, which they do. It’s not even that they help young people build credit in a world that all too often shuts the door on those who lack credit history.
Here’s the real reason: Credit unions are not-for-profit organizations that operate as a cooperative, community-centric model. That resonates with young people who want to make the world a better place by putting their money into socially responsible financial institutions. Credit unions offer a remarkable alternative.
“There is a natural alignment between the values of millennials and the mission of credit unions,” says Inc. Magazine. “Entrepreneurial and independently minded, millennials care about the world around them” and are characteristically more civic-minded than their predecessors.
Here are three reasons credit unions are a perfect fit for this progressive, socially conscious generation:
1. Credit unions serve everyone—especially young workers.
Many young people are confused about what credit unions are and who can join them. One survey found that more than a third of millennials don’t know what a credit union is. Seven in 10 weren’t sure if they qualified to join one, while more than half didn’t realize they could open a checking account at one. A common perception is that credit unions are exclusive membership organizations that only certain people can join.
That couldn’t be farther from the truth. Most community credit unions are open to anyone who wants to join. When you open a checking or savings account with a credit union, you automatically become a member—it’s as simple as that.
In fact, credit unions often serve people of modest means who struggle to establish credit with a larger bank or who can’t afford the numerous fees big banks charge. Whereas banks collect an average of $218 a year on low-balance checking accounts, credit unions collect just $80.
“Credit union membership tends to be concentrated in the working class of Americans,” says the Credit Union National Association (CUNA). “Over half of credit union members who rely primarily on their credit union for financial services have incomes between $25,000 and $75,000.”
2. Credit unions are owned by the people who use them. That’s you.
Credit unions are financial cooperatives, meaning that they are owned and operated by their members. Many of them began during difficult economic times, when local groups of people decided to pool their money together and provide each other with loans to help their communities grow and prosper.
Decades later, credit unions are still democratically governed by their members and still operate under that shared mission of people helping people. Every person who becomes a member also becomes a part owner of the cooperative. Unlike banks, which distribute their profits to wealthy shareholders, credit unions invest their earnings after expenses right back into their members, often in the form of reduced fees and lower interest rates.
In a world where institutions are “so large that clients can often feel they are at the mercy of others’ decisions and priorities,” credit unions empower their members to literally take ownership of their financial future, says legal expert Andrew Turner.
3. Credit unions help make communities stronger.
When you place your money into a local credit union, your money stays within your community. It could end up helping your neighbor buy a home or a local entrepreneur start a new business.
In fact, when banks pulled back on lending during the recession, turning both consumers and small businesses away, credit unions stepped up to fill the gap. Credit union loans grew by 8 percent during the peak of the financial crisis, when bank loans declined by nearly 10 percent. Credit unions have continued to expand their lending to small businesses over the past five years, even as bank small business lending has declined.
If credit unions have one thing in common with millennials, it’s that they’re invested in improving the quality of life within their communities. Credit unions, CUNA says, “continue to behave differently from investor-owned financial institutions, and that difference in behavior produces substantial benefits,”—both to their members and to the economy as a whole.