Millennials at workplace
@criene/Twenty20

If there were ever a generation to loosen the stranglehold big banks have on the American wallet, it would be the millennials.

This generation is the largest yet, with a population greater than France, and it already has plenty of experience with the limitations of large financial institutions. The 2008 financial crisis, the recent Wells Fargo fraud scandals, pervasive checking account fees and low savings account yields: Millennials have entered adulthood just as the big banks’ worst tendencies were exposed.

And yet, young workers today have stood by the big banks despite a roster of alternatives, such as credit unions and newer no-fee digital competitors.

Free checking is out there, if you want it. Your desire to save needs to outweigh the power of your banking inertia.

The illusion of free checking

As millennials begin their financial lives, they are primed to rethink banking relationships. A 2016 FICO report found those aged 25 to 34 were two to three times more likely to close out their accounts and switch to a different financial institution than members of other generations.

What are they looking for? FICO found that the number-one issue was high fees, followed by poor customer service or ATM/branch convenience issues.

Credit unions should offer a great alternative if high fees are giving you a headache. A recent Bankrate survey found 84 percent of credit union checking accounts lacked a monthly maintenance fee, up 12 percentage points over the past two years.

Credit unions also charge lower overdraft and out-of-network ATM fees than traditional banks, according to Bankrate data.

Moreover, online-only neobanks have bet the farm on avoiding most, if not all, fees. Simple, which was purchased by Spanish financial services conglomerate BBVA in 2014, does not charge monthly maintenance, overdraft or card replacement fees. Aspiration’s Summit Account, which offers a 1 percent yield, lets its customers choose how much they want to pay.

It may be that millennials view free checking with the same suspicion as an offer for free lunch.

Nearly all savers with so-called free checking accounts, millennials included, paid one fee or another over a 12-month span, according to a 2017 Cornerstone Advisors survey. A third of 25 to 34-year-olds, for instance, paid an overdraft fee, while 27 percent coughed up a third-party bank ATM fee.

Our tolerance for fees might be too high. Since we are more than used to a $25 charge for this, and a $10 hit for that, we don’t move our business elsewhere.

Conditioned for digital

While millennials may be inured to some basic level of fees, they are sensitive to how they bank. Mobile banking is how most people under the age of 44 interact with their money, according to a recent ABA survey.

And that makes a huge difference. Nearly two-thirds of big bank customers use their financial institution’s app, per FICO, compared to 42 percent of credit union members.

Perhaps that’s one reason why credit union usage falls by half as millennials migrate from college and into the job market.

Meanwhile, major tech players are driving demand in non-bank no-fee checking-like products. Amazon cash, Paypal and Venmo, while still a tiny part of the nation’s payment system, are gaining billions of dollars in “deposits.”

Paypal holds around $18 billion in unused customer funds, while Venmo completed $35 billion worth of transactions last year. Your bank’s ATM fees matter less if you can easily transfer money to your friends, or your local store, at no cost.

What should you do?

You need a checking account and a savings account, and perhaps more than one of each. And you should be cognizant of fees and yields when shopping for accounts, otherwise you’ll end up throwing money away.

The average amount in savings for a household helmed by someone under 35 is only $2,600, according to the Federal Reserve. That’s likely dramatically below what you need in a fully funded emergency savings account, so it’s important to avoid fees whenever possible.

Millennials, who are the most apt to change banks, should review their last six months of bank statements and see if they’ve been dinged for any charges. If there were fees, it’s time to consider an alternative.

For those who value a top-notch mobile banking experience above all else, consider no-fee digital options like Simple and Aspiration. If you want to have some physical presence nearby, see what terms you can receive from your local credit union.

That’s true even if you use Paypal and Venmo constantly, since those products are not FDIC-insured.