When we earn money from our jobs, we must put it somewhere because under the mattress isn’t safe. Fortunately, many lending institutions want your business and compete with each other to hold your money.
Do you deal with a bank or credit union? Most people see them as the same, and they do offer similar investment vehicles and services, but they are set up differently.
Are you wondering how credit unions are different from banks?
The Similarities
Both of these institutions are dedicated to helping clients with their financial needs. They offer a wide range of products and services, including:
- Savings accounts
- Checking accounts
- Debit cards
- Credit cards
- Loans
- Mortgages
- RRSPs
- TFSAs
Protections
Credit unions and banks both have protections in place for your money. Banks have a Canada Deposit Insurance Corporation membership, which ensures up to $100,000 for deposits per eligible account. Knowing their money is safe and sound is great peace of mind for clients.
Credit unions have similar insurance protections, but through provincial providers, their deposits are insured even higher, depending on where they operate.
Rates
Banks and credit unions are in direct competition for your hard-earned dollars, and they actively monitor the changing rates of their competitors. While they always want to out-compete each other, they do have limits, and this is where it pays to shop around for the best rates, both for borrowing and investing.
Money Management
Both institutions offer online banking, making managing your money convenient from the comfort of your home or through a smartphone while on the go. Banks have more resources to invest in digital banking and dynamic websites with the latest designs. Credit union focus their online banking more practically and utilize the same technology through their websites and apps from your smartphone.
The Differences
While credit unions and banks offer similar services and products, banks can offer a wider variety of offerings as they have the power of national chains. They are there to make money and often have a variety of transaction fees attached to their accounts. Credit unions can offer lower interest rates on mortgages and loans and higher interest rates on savings and investments. This is because they are not for profit. They may also charge fewer or lower fees for certain transactions.
Access
Banks have more locations and often have them spread across the country, making it easier to access your particular bank within your community and beyond. They will also have more ATMs with no geographical limitations. Credit unions are focused on their local community and actively serve their customers while giving back to help their areas flourish.
Membership
Anyone can open up an account at a local bank as they are in the business of making profits. The more, the merrier. Credit unions are similar in that they don’t discriminate but often focus on a particular field of membership for specific groups. These can include:
- Associations
- Regions
- Families
- Educational institutes
- Occupations
- Military
Opening an account at a credit union makes you a member, and you purchase shares. You also get equal voting rights, can attend annual meetings, join committees and even run to be a board member.
Overheads
Banks are large corporations with national reach and shareholders to pay, so they tend to have higher overheads. Their main duty is to provide financial returns to those shareholders. Credit unions focus on communities where it is owned by their members, running as a not-for-profit, and they, in turn, reinvest in their local areas. They want to provide affordable financial services within their community.
Criteria
The lending criteria are easier with a credit union than a bank, so more people can qualify for loans and mortgages. They also cater to non-traditional earners and those with lower credit scores.
Credit Unions vs Banks: What to Choose
Choosing which financial institution to work with is really down to personal choice. If you want convenience, you can open up an account at the nearest place, bank or credit union. A bank may have more branches to visit while you travel locally and beyond, which is also convenient. You may also want the security of a recognizable brand in every city. Others want to join a community of like-minded people who want to support a place that gives back locally. They understand the importance of community and want to have a say in the operations of their lending institution.
Consider these differences When looking for a new place to stash your money. See what works best for your life and confidently walk through the doors. Inside, you will find friendly staff with lots of financial offerings, more than happy to help you find what you are looking for.
