credit unions safer than banks

Credit Unions Are Dropping Free Checking Too — But Millennials Don’t Care

More people than ever — over 100 million — are now banking with credit unions, even though it’s increasingly costing them money.

A recent Bankrate survey found the number of credit unions with free checking accounts dropped from 78 percent five years ago to 72 percent today. But free checking is still much more likely there than at banks, where only 38 percent offer it.

“Credit unions have maintained free checking much better than banks,” says Dan Berger, president of the National Association of Federal Credit Unions. Five years ago, 68 percent of banks offered free checking accounts.

“That 72 percent for credit unions has been steady for the last few years and likely will remain so,” Berger says. “For the few that have made the business decision to slightly increase checking account cost, the nonstop regulations that continue to be promulgated are putting stress on credit unions, especially smaller ones.”

Berger argues that Consumer Financial Protection Bureau oversight has strained credit unions, which now have to find more creative ways to keep costs low. But that hasn’t discouraged more than 8 million consumers who have joined a credit union since 2009, and one group in particular: millennials.

Why credit unions are still your best bet

Since the Great Recession, more millennials say they don’t trust big banks, and 71 percent would rather go to the dentist than visit one. Instead, many of them are turning to credit unions, which are not-for-profit cooperatives run by their members. They offer most of the same services as big banks — and usually cheaper, because they’re not looking for a profit.

Jacob Jakuszeit, an urban planning student at Ohio University in Athens, Ohio, switched from Chase Bank in 2007 after it charged him multiple overdraft fees on a few small purchases.

“Chase charged me around 25 bucks for every day I carried a negative balance,” he says. “I ended up being in the red on my account more the $200 within a week. They weren’t understanding or willing to work with me, so I looked for other options.”

He’s not the only one. We talked to several millennials about what makes a credit union better than a bank. Here’s what they said…

1. Transparency

Credit unions hold annual meetings that are open to members. They also issue reports and financial statements every month.

“One of my motivations [for switching] was that the fees and structure are much more transparent,” Jakuszeit says. “I know where the money is going, and the fees aren’t prohibitive and so punitive because the motivation behind them is to pay for services, not pull money from someone who doesn’t have any.”

2. Lower fees overall

You don’t need much money to open a checking account at a credit union. Bankrate found the average minimum for opening one was $9.84. And over half of them — 62 percent — don’t require any minimum deposit to open.

Many credit unions also offer overdraft protections like linking to a savings account or a line of credit. Some have overdraft fees but are often lenient about it. The Navy Federal Credit Union, for instance, doesn’t charge a fee if you overdraw by less than $15, and it caps the number of potential overdraft fees at three per day.

The Ohio University Credit Union, which Jakuszeit is a member of, offers a $1,000 line of credit with a 2 percent interest rate that serves as overdraft protection. You have to opt in, but it doesn’t cost extra unless you take more than a month to pay it back.

“I don’t get charged any fees if I use the money, and have a set amount of time to pay it back before that loan accrues any interest,” Jakuszeit says.

If you’re worried about being able to find a credit union with ATMs, remember that depending on which credit union you join, you could have access to tens of thousands of free ATMs across the country. And some credit unions, like Alliant, will reimburse fees for out-of-network ATMs.

3. Better customer service

“When I’ve had direct deposit for banks, I always get my check faster than any Chase or Wells Fargo banker,” says Sasha Boaz, a dog daycare attendant who lives in Los Angeles. “I’ve had my credit card number stolen twice from online purchases, and it was very easy to get all my money back and get a new card.”

Corey Brown, a preschool teacher from East Lansing, Michigan, and a member of the Michigan State University Federal Credit Union, says he joined a credit union at first because it had a number of ATMs on MSU’s campus, but stayed because they are more forgiving with payments and fees.

“They also communicate really well if there’s any kinds of suspicious activity,” he says. “The employees are really wonderful and personable too, and will try to find different options that are best for you, not the most profitable for them.”

4. Democratically elected

Typical banks are operated by a board whose main responsibility is to maximize profit for shareholders. But a credit union’s board is democratically elected by all members in the credit union.

“Credit unions are owned by their members and thus have the ability to offer lower rates on services and loans as they aren’t trying to turn a profit for shareholders,”  Jakuszeit says.

5. Peace of mind

A study last year from Viacom called the Millennial Disruption Index found that out of six major industries — including personal computing, mobile, and household goods — banking institutions have “the highest risk of disruption.” That’s because millennials can’t tell big banks apart, and don’t trust them. “All 4 of the leading banks are among the ten least loved brands by millennials,” the study found.

“Big banks make me nervous. I have more peace of mind with a credit union,” says Madison Schoephoerster, a lab tech at Nationwide Children’s Hospital in Columbus, Ohio.

“National bank chains played a larger role in the housing market collapse and Great Recession,” says Elena Luker, a student at Colorado Mountain College. “I switched from a megabank to a locally owned-and-operated bank because it supports the community and economy more than banking with a large bank.”

Interested? Here’s how to join

Unlike big banks, you can’t just sign up with whatever credit union you want — each one has its own rules about who is eligible for an account.

It may depend on where you live, what your job is, and whether or not you have a family member who is already a member of that union. Many churches, school and alumni groups, and labor unions have credit unions specifically for their members.

But the rules do bend. For instance, even if you’re not a member of the military, you can join the Pentagon Federal Credit Union for $15 by becoming a member of the National Military Family Association.

Or, to find a credit union near you, check out the “Credit Union Locator” from the National Credit Union Administration.

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