When it comes to financial institutions in Canada, the scene is dominated by The Big Five: Bank of Montreal (BMO), Canadian Imperial Bank of Commerce (CIBC), Royal Bank of Canada (RBC), Scotiabank, and TD Canada Trust. These banks are where most Canadians do their day-to-day banking, but did you know there’s another solution?
Credit unions are an alternative to banks and have been around since the first caisses populaires (people’s bank) was opened in the early 1900s by Alphonse Desjardins in Quebec. The idea of a people’s bank was to ensure that the focus is on the customer instead of profits.
There’s no denying that traditional banks still have the lion’s share of the market. Still, there are now more than 700 credit unions across Canada. They offer similar services to banks, but they often have a personal touch, which is why many people prefer to use them.
What is a credit union?
Credit unions are a not-for-profit business that ensures that their members are put first. This may sound odd, but when you join a credit union, you become a member, so the focus is on you. Any profits that the business does make are typically reinvested back into the business, members, or community.
It’s estimated that a third of Canada’s population are members of a credit union. The most popular provinces for credit unions are Quebec, Alberta, and British Columbia. Some credit unions only have a few hundred members, while others may have hundreds of thousands.
Every credit union is typically regulated by the province where they operate. That said, there has been some recent legislation that would allow credit unions to expand. Eligible deposits in all registered accounts with Ontario Credit Unions have unlimited deposit insurance coverage through the Financial Services Regulatory Authority (FSRA). Over in Alberta, there’s the Alberta Credit Union Deposit Guarantee Corporation.
How do you join a credit union?
Joining a credit union is no different from a bank. You just need to provide proper identification to get started. That said, provincial credit unions sometimes have rules about allowing you to join. For example, you usually need to live, work, or attend school in the province where the credit union is located.
It’s also worth noting that some credit unions are catered to specific professions such as police officers, teachers, health care workers, etc. Joining a credit union that focuses on your career can be beneficial as they’ll have experience working with people in similar situations as you.
Finally, to join a credit union, you usually need to buy a share in the company, which technically makes you an owner. One share will only cost you about $5-$25. Once that’s done, you’re a member, and you can start using the services offered by the credit union.
What’s the difference between banks and credit unions?
As mentioned, credit unions are not-for-profit, prioritize their members, and usually require you to buy a share to join. Beyond that, banks and credit unions are very similar, but there are still some key differences. In almost every case, the interest rate on saving accounts is higher at credit unions. Your monthly fees will also typically be much lower compared to banks. Since credit unions focus on their members, customer service is almost always excellent.
While banks are giant corporate entities, there’s no denying that they have a few things that credit unions lack. For starters, they typically have a more comprehensive range of credit products available. More specifically, they’ll have multiple credit cards that offer great benefits. Banks also have a wide selection of investment and insurance products available, which can be handy if you’re trying to keep all your finances under the same umbrella.
Both banks and credit unions will usually offer the same type of accounts such as Chequing, Savings, Tax-Free Savings Account, and Registered Retirement Savings Plan. You can also get a mortgage or line of credit at banks and credit unions.
Although credit unions do have physical locations, there tend to be just a few and are usually limited to within the province where they operate. Compare that to banks where they have locations all over Canada and sometimes in the United States, or even internationally.
Having many locations may be necessary to some Canadians, but since credit unions have fewer brick and mortar stores, they can pass on any savings to their members. Both banks and credit unions have an extensive network of ATMs, so accessing your money is easy.
Should you choose a credit union over a bank?
It’s really a personal decision. While banks may offer more services and products, credit unions typically have lower fees and better customer service. It’s also not bad to join a credit union if their focus is on a specific profession you’re part of.
