The Deposit Growth Secret for Credit Unions: Small Loans Earn Big Relationships

90% of Gen Z microloan borrowers increased their deposits and 70% of millennials

By James Chemplavil, Founder/CEO, Salus

Most credit unions chase deposits with rate specials and promotional campaigns. They advertise higher yields, waive fees and hope members will notice. Meanwhile, they watch younger members maintain minimal balances year after year, waiting for them to ‘mature’ into profitable relationships.

We have a deposit growth secret to share with credit unions. There’s a more effective approach hiding in plain sight.

GFA Federal Credit Union discovered something remarkable about its microloan program. Something unexpected happened: borrowers didn’t just take out loans—they fundamentally changed their banking behavior.

GFA members saved hundreds of thousands of dollars using GFA microloans compared to predatory payday lenders or online installment lenders charging triple-digit interest rates. But that’s only part of the story. The real story emerged when the credit union analyzed deposit behavior.

The Data That Changes Everything

Traditional thinking suggests that small-dollar borrowers represent higher risk and lower value. The numbers from GFA Federal Credit Union tell a different story entirely.

Giving GFA members microloans did more than help them in a tough situation – it deepened their relationship with the credit union. Fully 65% of GFA’s microloan borrowers increased their deposits at the credit union one year after getting a microloan. The story was even better for young members: 70% of millennial microloan borrowers had increased their deposits at GFA, and 90% of Gen Z borrowers had increased deposits at GFA.

And for the credit unions, microloans grew into something much bigger – the value of each membership increased for GFA, particularly among millennial and Gen Z members.

The Psychology of Financial Engagement

Young adults don’t develop banking loyalty through marketing messages or family traditions. They develop it through experiences that demonstrate genuine value during moments of financial stress.

A microloan for an unexpected car repair or medical bill does more than solve an immediate problem—it creates trust. When that loan comes with easy access to earned wages between pay periods, it demonstrates understanding of modern financial realities.

Beyond the Numbers: Strategic Implications

These results reveal several strategic insights for credit unions. First, traditional product rollouts are backwards. Instead of waiting for members to build relationships before offering relevant products, successful credit unions lead with solutions for members’ immediate problems.

That direct deposit is crucial for both mitigating your loan risk and driving deposits. The requirement creates the infrastructure for deeper relationships. Members who might otherwise maintain minimal balances suddenly have regular cash flow through the institution.

Especially Gen Z and millennial members. The dramatic differences between the generations suggest that millennials and Gen Z are more likely to consolidate their banking when they find genuine value. And that member loyalty can stem from something as small and simple as a $300 loan.

The Competitive Reality

While credit unions debate whether to offer these services, fintech companies are capturing younger members with exactly these solutions. The difference is that fintech companies typically can’t offer the direct deposit integration that transforms small loans into comprehensive banking relationships.

Credit unions have a structural advantage if they choose to use it.

The GFA Federal Credit Union data represents more than product performance metrics. It demonstrates that when credit unions meet members with relevant solutions at the right moment, the response can fundamentally alter the relationship trajectory.

The question facing credit unions isn’t whether this approach works; it’s whether they’re ready to lead with solutions their members actually need.

Want to see how Salus Microloans and Earned Wage Access can transform your deposit growth? Schedule a consultation to review implementation strategies and projected results for your credit union.