Five Reasons You Should Consider Banking With A Credit Union
Credit unions are a big part of the Canadian banking system. Canada’s credit unions have more than 5-million members, and there are hundreds of local credit unions and caisses populaires serving communities from coast-to-coast.
While credit unions are hugely popular, especially in western Canada, you may never have thought much about them. If you’ve been working with the assumption that credit unions are somehow inferior to banks, it’s time to take another look. Credit unions offer many benefits, including some of the best rates on financial products. Let’s take a look at why you should consider banking with a credit union:
What is a credit union?
In Canada, a credit union or caisse populaire is a financial institution that offers many of the same products as banks. Credit unions offer chequing accounts, savings accounts, investments like guaranteed investment certificates (GICs), credit cards, mortgages, loans, lines of credit, and registered accounts like RRSPs and TFSAs. Many credit unions also offer business banking as well.
The main difference between credit unions and banks is that credit unions are not-for-profit organizations owned by their members. Unlike banks, whose primary responsibility is to shareholders, credit unions exist solely to serve their members.
Credit unions come in all shapes and sizes. In Quebec, Desjardins is a federation of 293 local caisses populaires, the largest in North America. The largest credit union outside of Quebec in terms of membership is Coast Capital Savings in BC, with over 600,000 members. On the smaller side, you’ll find credit unions like Radius Credit Union in Saskatchewan with fewer than 5,000 members.
Why choose a credit union over a bank?
Premium chequing without the premium price
Premium chequing accounts come with all the bells and whistles: unlimited transactions, free in-person transactions, access to a large network of ATMs, free cheques and free bank drafts.
At major banks, these premium chequing accounts can cost as much as $30 per month. At some credit unions, you can find these features for far less. For example, Meridian Credit Union in Ontario offers all of the above for $12 per month.
Most credit unions offer the same level of chequing service as major banks, including access to tellers, free access to a broad network of ATMs, and online banking. And as with the big banks, you can open a bank account online.
Actually earn interest on savings accounts
Some of the best rates on high interest savings accounts in Canada are offered by credit unions – and some of the lowest are offered by the big banks.
Take, for example, the Scotiabank Momentum PLUS Savings Account, which pays 1.05% interest after 90 days (promotional rate of up to 5.4% for 90 days), and charges a transaction fee of $5. Compare that with the Saven Financial High Interest Savings Account, which pays 3.70% interest and has no transaction fee.
Get the best GIC rates
Guaranteed investment certificates (GICs) are an investment that let you lock in your money for a fixed period of time for a set interest rate. Just like with savings accounts, credit unions far outperform the big banks when it comes to GICs (or term deposits, as they’re often called by credit unions).
In fact, the best GIC rate in Canada for a 1-year term is currently being offered by a credit union. Saven Financial is currently offering a 1-year GIC with a rate of 4.90%.
Compare that to the big banks: The best 1-year non-redeemable GIC rate being offered by one of Canada’s big banks is currently CIBC at 4.25%. The lowest rate being offered comes from RBC at just 3.00%.
Have a say in how your credit union is run
Banks are for-profit, publicly traded corporations. Their first responsibility is to deliver results to their investors, and that means doing whatever it takes to make as much profit as possible.
Credit unions, on the other hand, are not-for-profit organizations that are owned by their members. Their first responsibility is to provide service to their members. Credit unions’ boards of directors are appointed by their members. And when credit unions make a profit, they invest it in their members and community. For example, Servus Credit Union in Alberta has a profit-sharing program that rewards members with cash back and dividend payments based on the balance in their chequing, savings, and loan accounts.
Do good for your community
Many banks have corporate social responsibility (CSR) programs, and many do a lot of good in their communities and around the world. For example, Scotiabank’s 2022 CSR report says, “In 2022, 35,000 employees dedicated 86,000 volunteer hours in their local communities. Scotiabank donated $1.5 million through employee community programs.”
Credit Unions do a lot of good in their communities as well, and because many credit unions have roots in a single community, the good work they do hits close to home. For example, British Columbia’s Coast Capital, a Certified B Corp and social purpose company, reinvests 10% of its budgeted bottom line back in to its local communities, with over $100M invested since 2000 in support of building better futures for people and businesses in Canada.
How credit unions fit in to your overall banking strategy
There’s no rule that says you have to have all of your accounts with the same bank. The best strategy is to seek out the best products, and avoid unwavering loyalty to a single financial institution.
When you need a new chequing account, find the best chequing account with the lowest monthly cost. If you’re looking for a savings account, choose the one with the highest rate. If you’re looking for a credit card, choose the one with the highest net reward based on your spending profile. When you’re shopping for a mortgage, use a mortgage broker to get lenders competing for your business and choose the lowest rate with the options you need. You can use different banks or credit unions for all of these products, and you’ll probably save a lot of money by shopping around every time.
While banks have all the brand recognition, credit unions are often very competitive. The next time you’re shopping for a financial product like a chequing account or savings account, keep credit unions in mind. You might find they have the best deal on exactly what you need.
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