Numbers don’t lie: Millennials are ditching big banks and signing up with credit unions and community banks. According to a survey released by Accenture, 18 percent switched banks in 2014, while 16 percent left big banks during the same time period. On the other hand, Millennials who signed up with a credit union increased by 3 percent. One big reason for this is the fees that big banks charge. In a time when Millennials are burden with debt, are strapped for cash, and are doing their research online before making a decision, they’re being more careful and choosy with who they do their banking. Here’s a closer look at some of the reasons why Millennials are making the switch:
High Overdraft Fees
Who wants to get dinged with outrageous and unnecessary overdraft fees? A recent study by Pew Charitable Trusts found that out of 45 major U.S. banks, more than 80 percent still charge fees on ATM and debit card-triggered overdrafts, earning those banks 400 percent more in revenue than the smaller group of banks that don’t charge those fees. How much did banks rake in with overdraft fees in the first half of 2015? A cool $2.4 billion.
On top of that, 26 banks that were included in the study charge an additional fee if a customer didn’t repay the amount of an overdraft within a certain period. The average fee was $15 and the average number of days before the fee was charged was five.
High Account Maintenance Fees
A Bankrate survey found that 67 percent of banks charge between $35 and $38 per overdraft (reported by Pew Charitable Trusts), while the average surcharge fee of the top 50 credit unions was $26.78. The Consumer Financial Protection Bureau found that in 2012 customers of U.S. financial institutions paid more than $34 billion in account fees and that 61 percent were due to consumer fees, overdrafts or nonsufficient funds. Yikes.
Checking Account Fees
An annual survey on bank fees by MoneyRates.com, which included a mix of 100 small, medium, and large banks, found that large banks have higher fees and less free checking. The survey also found that large banks are the least likely to offer free checking. Only 17 percent of large banks offer it, compared to 28.23 percent of medium-sized banks and 31 percent of small banks. On top of that, free checking is getting harder to come by. Of the banks tracked in the survey, only 25 percent offer it, down from 35 percent just three years ago.
Grayson Bell of Debt Roundup had been a customer with a large, national bank for most of his life, and didn’t think anything of it until his bank started instituting monthly fees on basic checking accounts. That put a bad taste in his mouth, and so he decided to switch to a credit union. “The service is much better, loan rates are lower, and they even have interest-bearing accounts,” Grayson, who is 32 and made the switch at 27, explains. “The best part is there were no fees to hold my money in their insured accounts. I feel my credit union is looking out for my best interests and helping me reach goals I’ve set for myself,” he adds. “I didn’t get said feeling from the big bank. I was just a number to them.”
According to a 2014 FICO survey on Millennials and Banking, after high account fees, the second-biggest reason Millennials switch banks was due to poor customer service experience. While 34 percent left their bank because they felt the fees were too high, 27 percent cited a negative experience with a representative being why they decided to make the switch.
Jason Butler of The Butler Journal explains that he chooses to be a member of a credit union because of the friendly service. “The main reason that I bank with a credit union is because they treat me like a real person,” 32-year-old Butler explains. “They aren’t constantly trying to get me to sign up for a credit card or a loan. They let me withdraw or deposit money with no hassle. They take care of me and aren’t constantly trying to sell me products that I don’t need.”
According to the 2014 FICO survey, Millennials are also saying “bye bye” to their banks due to ATM-related reasons: either because there were not enough of them, they were inconveniently located, or because of the fees associated with using ATMs. Michelle Schroeder-Gardner of Making Sense of Cents, who is currently living out of an RV with her husband and touring the U.S., has only banked exclusively with credit unions. “I love the great customer service, lower fees, and better interest rates,” Schroeder-Gardner, who is 26, notes. “I also like how there is shared branching, so whenever I travel I have no problem accessing my bank due to the fact that there are credit unions all over.” With shared branching, which is a network of credit unions from all over the country, you can access your account at thousands of locations in the U.S., making it convenient to do your banking just about anywhere.
While there are a slew of reasons why Millennials are ditching big banks for community ones, the fees that banks charge is at the top of the list. To learn more about how you can save money through making the switch, find a credit union near you.