As ever-increasing bank fees continue unabated, Canadians are becoming more and more open to exploring less conventional banking options. Credit unions, for instance, share important similarities with banks. But many people have yet to fully embrace them simply because we don’t know a whole lot about how they operate.
To up your financial acumen, we’ve compiled a list of 11 must-know facts about credit unions.
When it comes to money, credit unions are like banks
Like the ubiquitous and powerful big banks, credit unions are full-service financial institutions that offer chequing and savings accounts, loans to businesses, mortgages and investment advice and services.
Lower lending rates and higher deposit interest
Because credit unions can’t offer the same level of customer service in terms of things like branches, hours and branded ATMS, they usually offer higher interest rates for deposits and lower loan rates. Typically, they also charge no account fees.
Membership matters: co-operatives versus corporations
To bank at a credit union, there are a series of qualifications that a person must meet to become a member, including things like living or working in the area or province. This is so that the credit union can ensure people are invested in the welfare of the financial institution and the community in which it operates. Members must also buy a certain number of shares in the credit union (these are usually very inexpensive — like $5 per share for a total of $25 or $50 dollars). However, in return for those shares, members get to partake in a percentage of their credit union’s yearly profits. This is the essence of a co-operative, and the main way in which a credit union differs from a bank, which is a corporation.
Run by communities rather than CEOs
As financial co-operatives, credit unions are owned and run by members and these members decide where the bank invests whatever profits it does make for the betterment of the community. A credit union’s board of directors is even elected by the institution’s members.
People before profits
While banks are profit-driven enterprises that are answerable to their shareholders, credit unions are non-profit organizations answerable to their members and communities. The overarching mandate of a credit union is to reinvest profits in the neighborhoods and provinces in which they operate.
Because they’re non-profit, credit unions are often deeply involved in local charities and causes, and may also be more willing to support small local businesses (even if they don’t make major profits or might be more of a risk) than a big bank would.
Credit unions are award winners
In 2016, marketing research firm Ipsos reported that for the 12th year in a row, Canadians ranked credit unions number 1 as the overall best in Customer Service Excellence and Branch Service Excellence (beating out all the big banks).
They started in Quebec
In 1900, most people generally didn’t have access to banks the way big corporations and the wealthy did. In response to this inequity, Alphonse Desjardins founded Canada’s first credit union (called a caisse populaire in Quebec) in Levis, Quebec. Today the Desjardins Group remains one of the most respected credit unions in the country.
They’re more popular than you think
In Canada, there are more than 600 credit unions operating a total of nearly 3,000 branches. Their combined assets exceed $300 billion and membership totals add up to more than 10 million.
Your money is protected
This is where things can get complicated. Each province has its own protection insurance rules for credit unions, so it’s best to ask your credit union about the specifics of how your money is protected. For example, in B.C., the entirety of your deposit is insured, whereas in Ontario, your deposit is protected up to $100 000. However, the important thing to know is that, much like the big banks, your eligible deposits are insured.
There’s an expansive ATM network
Some people worry that the regional nature of credit unions can limit access to their money. However, credit union debit cards have the same usability as those of the big banks. Most credit unions also belong to The Exchange Network, which gives you access to an entire network of ATMs for no extra charge. These ATMs form a massive network and can be found throughout Canada (you can check the website for specific locations).