Credit unions perform the same functions as banking institutions around Canada, but not everyone knows what they are or how they work. Whether the average Canadian is looking to invest their money in a savings account or borrowing money for a home or car purchase, they typically go straight to their local bank lender. But that might be a mistake. Not investigating the many opportunities to join a credit union and reap the benefits may have many consumers missing the financial boat.
It isn’t just Lehman Brothers who got caught doing unscrupulous things over the past decade; Wells Fargo is still involved in a class-action lawsuit for signing up customers for products unwittingly and using their banking information without their clients’ knowledge. There is a growing distrust in banking institutions, and with reason.
Banks aren’t beholden to their customers the way that credit unions are. Sure, they are supposed to follow the law — although not all of them do — but credit unions rise and fall by the way that they service their members, which gives them good reason to play by the rules and above the table.
Banks are nothing but for-profit entities, which means that they aren’t all that concerned about whether their clients make money or not; that has no effect on their bottom line. They are more likely to put your money at risk than a credit union.
They also aren’t opposed to taking advantage of borrowers by stuffing in all sorts of high hidden fees or socking the clients with increasingly high lending rates. Credit unions like the Assiniboine Credit Union are different because they are guided solely by the membership that they can tally, they will often provide better interest rates, lower fees, and better customer service than their banking cohorts.
Yet on the average, Canadians use credit unions at about a third of the rate that they do banking institutions. If you are considering taking out a loan or investing your money for a better return, before you head to your local banking branch, you might want to consider the advantages that credit unions provide their members.
Credit unions don’t have the huge overhead costs that big banking institutions do. That means that they are usually small independent lenders, leaving them with fewer costs to run. Those savings are passed down to their members. They typically offer fewer fees to try to make up for the high operating costs.
Almost 70% of credit unions offer free checking, compared to only about 39% of banks. And their overdraft fees are typically anywhere from $20-30, which is about $5 less than a typical bank fee. Clients also aren’t required to have minimum balances to cover the cost of overdraft fees. The only disadvantage of using a credit union is that there is usually about a $2-5 maintenance fee that you pay monthly. Credit unions aren’t constantly finding ways to get money from the consumer to pay for their high expenditures, like big banks are.
If you’re living in, say, Winnipeg, you know that the Interest rates in Winnipeg aren’t what they used to be. Many banks not only don’t offer you interest on your savings, but they also make you pay to keep your money. Doesn’t sound like a very good investment. Big banks typically offer nothing more than a safety deposit box to store your money, and in the end, they cost you more to keep and use your money than you are getting in return.
Credit unions are known for their much higher yield rates when it comes to checking accounts. A 2012 study found that almost 70% of credit unions typically don’t offer much in the way of interest rates, but they are higher when compared to bigger banking institutions. Your local Winnipeg-based credit unions who do offer interest offer somewhere around .12%, which isn’t much, but it is better than nothing.
Credit unions might not have the accessibility that big banking institutions do, typically only servicing those who are local. But what they do offer is individualized care that most big banks don’t have. When you go into your local branch, the people at the credit union usually know you and are there when you need them or will make individual choices about you due to the relationship you have with them.
Big banking institutions are so large that there is no way for them to provide the individualized approach that credit unions can. For those looking for a more “personal” touch, a credit union is dedicated to customer service and making sure their members are highly satisfied.
Credit unions might not be as popular as big banking institutions in Canada, but what they do offer is savings that you don’t get at banks due to lower overhead costs, an individualized approach, and no hidden fees or other ways to sock the consumer for profit.