Saving for a rainy day? Hoping to earn interest on your savings? Just need a safe place to stash your cash? Conventional wisdom would say you need to open a bank account. And that’s right. A bank account is a perfect solution to grow your savings and safeguard your wealth. But how do you choose the right bank? Or the right account? What if, there’s an even better option than a bank?
One in five Canadians prefers using credit unions over banks.(We’re guessing the other four haven’t read this article yet.) The reason? Credit unions offer a range of benefits over regular banks, such as a no-fee bank account. (Yes, really. More on that later). Before we get into the different reasons for choosing a credit union over a bank, let’s take a quick dive into the basics.
What is a credit union?
A credit union is a non-profit cooperative financial institution. That is, a credit union is a financial institution or organization owned by its members. When you become a member, you automatically hold a stake in the credit union. This makes you both a customer and a part-owner. According to the Canadian Credit Union Association, there are about 241 credit unions in Canada, serving over 5.8 million members. They offer convenient and affordable financial services, such as:
- No-fee chequing accounts
- No-fee savings accounts
- Low-interest loans
- Wealth management
- Credit cards
- Digital financial services mobile apps & online banking
- Free ATMs
How do credit unions work?
Credit unions carry out the same functions as banks. They help you to safeguard your money, grow your savings, and finance your needs.
Save: They help you save your hard-earned money and even offer no monthly fee bank accounts.
Earn: They help you earn money on your savings through various savings products and offer interest on the money you deposit in your account.
Give: They offer a variety of loans based on your requirements, in the same way as banks. But, loans aren’t all they give. They also give back to the communities they serve through different initiatives.
While credit unions aren’t identical, all of them follow certain fundamental principles. These cooperative principles can help to shed some insight into how credit unions work.
- Membership for all: Anyone can become a credit union member or customer as long as they satisfy basic criteria. For example, if you’re a Canadian resident above 18 years of age, you can quickly become a member and open a no-fee bank account.
- Members matter most: Credit unions put the interests of their members above profit. The money members deposit into their accounts provides loans to other members. Credit unions channel their profits back into the credit union. Some of it is used to give out as loans or to pay out as dividends to members. A chunk is also put toward bettering their products and services. Credit unions offer members a range of benefits such as high interest rates on their savings, lower or competitive interest rates on loans, and no monthly fee bank accounts as well.
- Community-centric approach: All credit unions work towards the betterment of their community. Instead of competition, they foster a spirit of cooperativeness. For example, credit unions across Canada work together to provide every member with free access to a widespread network of ATMs. Putting the focus on giving back, credit unions serve their communities by volunteering, sponsorships, and extending services to communities that other banks fail to serve.
How are credit unions different from banks?
While both banks and credit unions offer similar services, there are key differences between them. One of the main differences between a bank and a credit union is their ownership. Investors own banks. In contrast, members of a credit union are all part-owners of the credit union. The second major difference is their purpose – banks are profit-driven organizations while credit unions follow a not-for-profit model. A credit union focuses on providing its members with financial services at an affordable fee. A bank’s ultimate goal is to maximize returns for its shareholders.
In other words, credit unions serve their members while banks serve their investors. Which of these seems more deserving of your patronage?
Why should I choose a credit union over a bank?
To help you decide, we’ve listed a few reasons why you should choose a credit union over a bank. Are we biased? Probably. But, are we also correct? Absolutely.
Enjoy affordable financial services
Banks work to make a profit. Want to open a bank account online with no deposit? Tough luck. Banks will usually demand a range of fees to open an account like operating fees, service fees, ATM fees, and application fees. They may even charge fees for additional perks such as higher-limit credit cards. All these fees rack up, forcing you to spend more every month or year. For example, some banks charge as much as $30 per month just so you can bank with them.
On the other hand, credit unions strive to make financial services as affordable as possible for their member-customers. They do this by providing several free services. For example, you can even apply for a chequing account online with no deposit besides a nominal share purchase. This kind of affordability makes banking and financial services more accessible to everyone. At Innovation Credit Union, it could save you as much as $360 per year.
Get interest rates that work for you
Since credit unions aren’t trying to make a pretty penny off you, they set interest rates that tend to be favorable to member-customers. Banks need to make a profit. They do this by offering lower interest rates on the money in your account and higher interest rates on loans you take from them. The difference between the two is their profit. Banks pay out this profit to their investors.
As we’ve mentioned, credit unions will charge you competitive rates on loans and superb rates on mortgages. This allows you to grow your savings and save while paying back loans. Instead of profits, providing you with financial services is their ultimate goal. This ensures you’ll almost always get a better deal at a credit union.
Be more than a customer
At a bank, you’re never more than just a customer. At a credit union, you’re a customer, member of the organization, and a part-owner. If a credit union does well, you profit (as does the community it serves). You’re not just a cog in a wheel; you’re an integral part of an institution. Credit unions strive to ensure your wealth and well-being are a top priority. Always. We take customer service to a whole new level, because you aren’t just a customer. You’re a part of us. Is it any wonder then, that credit unions have received awards for their customer service for 15 straight years? That’s right. Credit unions have consistently beaten Canada’s top five banks to win top awards in the Ipsos Financial Service Excellence Awards for Customer Service.
Give back to your community
Credit unions serve their communities in many different ways. It is in their DNA to do so. At Innovation Credit Union, we invest 2-4% of our profits back into the communities around us. When you choose to open an account, you automatically choose to give back to your community through our community outreach programs. Remember, funds for these initiatives don’t come from any fees you pay. But by opting to keep your savings with us, you end up making the community (and the world) a slightly better place.
Should I part ways with my bank?
You don’t need to say goodbye to your bank just yet. But you should check just how much you are paying in bank fees and what kind of benefits your bank can offer. You may be paying more than you should. Or worse, paying for things you don’t need or use. Make sure to weigh your financial needs and goals carefully. After all, there’s no reason for your hard-earned money to line someone else’s pocket. Now that you’re aware of the different options at your disposal, you can make a more informed choice.
If you’re starting with banking, credit unions are an easy and affordable option that you can trust. We’ve already given you a range of reasons why you should choose a credit union instead of a bank, but here’s another: At Innovation, you can earn every time you bank with us. Our Member Rewards Program allows you to grow your bank balance. Learn about all the perks you can enjoy as an Innovation member-customer.
Credit unions offer a range of financial services to meet all your banking needs from savings and chequing accounts to wealth management and loans. They also give you a chance to choose the kind of institution that puts your interests first. One that offers you a chance to save, earn and give at the same time. Banking isn’t always simple, but some choices are.
Become an Innovation member and earn when you bank. Apply for a No-Fee Bank Account online today!