Don’t Let Millennials Use Payday Lenders

Gen Y is facing unprecedented economic hardships, but they don’t deserve to be lured into unhealthy financial products.


Credit unions, how can you help local underbanked Millennials in a time of need?

According to a recent study of 640 Millennials conducted by Think Financial, more underbanked Millennials are using financial products such as payday lenders, pre-paid cards, and check cashing services that are stereotypically seen as “downscale.” Incredibly, they say they are satisfied with their experience!

If Millennials are using sketchy financial service because they want to, instead of because they need to, will that mentality carry over to future generations and perhaps change the way we interact with financial institutions? Could payday lenders and check cashers become the new normal way of banking?

Let’s take a step back. Millennials can easily be classified as one of the unluckiest generations in recent history. Unemployment for workers between 20 and 24 is a staggering 13.5%, according to the U.S. Bureau of Labor Statistics. On top of that, 5.9 million young adults between 25 and 30 are currently living with their parents. Of those 5.9 million living at home, 45% are earning incomes below the poverty line.

Have Millennials hit rock-bottom, with nowhere to turn to for reliable banking, or have payday lenders and check cashers gained a better reputation?

Think Financial says it is a sign of recent times, and Millennials want products that fit their lifestyles. “This study confirms that young people across the spectrum have a need for the convenience, utility, and flexibility that alternative financial services provide,” Think Financial CEO Ken Rees says in a press release.

So, what does this mean for credit unions? Is there an opportunity to swoop in and nurture the Millennials when they need it most? Can we build relationships while still offering convenient, emergency-based products?

Many credit unions offer “Pay Day Alternative” loans. For example, University of Virginia Community Credit Union ($595M, Charlottesville, VA) describes its loan as one that “dramatically lowers the cost of borrowing, while helping you build your savings balance. Whether you’re stuck in the payday loan cycle or facing an unexpected expense, our PALS Program can help.”

USC Credit Union ($361M, Los Angeles, CA) offers a FlexPay Line of Credit that allows a member to make small, short-term “emergency” loans to themselves at a lower rate with the minimum due at their next payday.

In Pennsylvania, 79 credit unions participate in Credit Union Better Choice, a short-term loan program that offers a 90-day repayment terms, flexible payment schedule, and an 18% APR with a built-in saving benefit and optional financial counseling. This programs sounds smarter than’s 485.45% APR!

Credit unions, what programs could you offer to build relationships and help underbanked Millennials in their time of need?


June 12, 2012


  • Knowing my college and recently-graduated aged kids, I don't find it surprising that they use payday lenders, pre-paid cards and check-cashing services. They are busy people and going to a "quick and easy" solution to their cash needs makes sense to them. Are they underemployed? Absolutely. I find it hard to believe that the unemployment rate is only 13.5% for this group. Unemploymnent, in general, is that high or higher when you count those not looking for a job anymore. You can't trust the government BS that the rate is only 8.1%. Nice job.
    jim dufford
  • Thanks for this thought provoking article. A couple thoughts for you. Even though payday lenders are very expensive their customer service tends to be some of the best in the financial services industry. It's one of the reasons they are so successful. Second thought, the credit union movement has a dirty little secret called overdraft protection as do many banks. Compare the amount actually paid out on overdraft protection with payday lenders and you'll see that the payday lenders are actually a bargain. Thanks again for this very good article.