There is a lot of complicated jargon used to confuse and intimidate customers who are searching for the best institution to place their earnings. Here, we’ll break down what are the important points you need to consider in order to make the best decision for your pocket. The difference can be huge in interest rates and T&Cs can be a nightmare to navigate. So let’s dive straight in.
Why choose a credit union over a bank?
- One for all and all for one
As we all know banks are for-profit companies that is their many purpose. How they achieve this profit is by providing banking services to their customers and maintaining a trustworthy brand and customer loyalty. On the other hand credit unions work in a very different way. They are essentially co-operatives, each ‘account holder’ is known as a shareholder and while in a traditional bank you expect to earn interest in a credit union you will instead be earning dividends.So what do these differences in terminology mean to you? First off, the primary goal of a co-operative is to benefit its members. So instead of taking whatever interest the bank decides to give you that year (other than moving to another bank that operates on the same system) you know that your credit union isn’t going to be taking a healthy cut off the top. All of the profits are dispersed amongst members. You also have a voice in how your credit union is run and are invited to attend board meetings and vote. A lot of shareholders are compelled by this sense of community; of investors working together toward a common goal without being shadowed by a giant financial institution.
- Lower fees and higher interests rates on deposits
Generally you will be looking at lower interests rates for mortgages as well as car loans. This goes back to the not-for profit set up of credit unions which plays a big part in the lower tax rates they enjoy compared to banks. As you now know, the lower the tax the credit union has to pay the more money it has in the cache to share amongst members. This also to loans which may mean serious savings for you in your repayments. High interest rates is another bonus you will enjoy as shareholder. But the biggest savings you’ll make will be on fees. Credit unions typically offer free services such as withdrawals and electronic transactions.
- Pooling resources
Although credit unions are often localized they often work with other credit unions to provide better services to their shareholders. This helps credit unions provide better services including technological advances. Banks are prohibited to collaborate due to their for-profit stance.
- A personal touch
With everything becoming digitized we are dealing less and less with people and more with machines. Now you think this may contradict my previous point being that digital services are becoming more advanced but they do continue to maintain the personal experience. There is a lot often consistent interaction between shareholders and employees; where you’re often known by name when you walk in. It feels much more like a community and so suits people who like to have a good relationship and get reliable advice from a familiar team of experts.
Why choose a bank over a credit union?
All those handy new services that do genuinely make handling finances a lot easier and quicker are nearly always rolled out first by banks. Choosing to open an account in a bank will mean you have the latest technology, including apps to transfer money.
Whether you’re opening an account as a student, graduate, pensioner or indeed opening a savings account for your child there will be an account to offer specific services for where you are in your life. Bank of Nova Scotia, for instance, provides students with free mobile transactions, no monthly charge and incentives to earn points for holidays and cinema outings. So, it’s fair to saw that it is tailored to giving undergraduates what they most want out of a bank account. Likewise, seniors (60+) can benefit from really substantial discounts on the monthly fees in both chequing and savings accounts. So, unlike what most people believe, the abundance of choice can actually be a good thing as it can provide your monetary requirements, whatever place you are at in your life.
- More locations nationwide
If you are on the road a lot or for any reason may need to avail of ATMs across Canada then I’d be suggesting investing your money into a bank. If you need to update your finances and are part of a national bank you can pop into any branch and they will be able to give you advice. It can get very complicated and fees can also ramp up if you are managing your banking with a credit union on the other side of the country. So unless your credit union has uniquely advanced online banking services it’d be better to look for a national bank. They also tend to have longer opening hours. Also, banks are more likely to be opened on weekends which is, of course, handy if you don’t have access to a credit union during the week due to work commitments
All in all, I would recommend making a list of what services you most need. Is convenience a priority? Or how about perks for depositing money? Or access to financial products specific to your needs? These are elements that would suggest that going to a traditional banking service would be more suitable to your needs.
On the other hand, is it more important that your mortgage gets paid off with a (relatively) low interest rate? Are you looking for customer service? Maybe you’d like to get involved and feel in control of your finances by attending meetings and using your vote. This can be refreshing and it’s important to remember that credit unions have not to date been bailed out using taxpayers’ money.
So, whichever you choose I hope this article has helped to clarify the fundamental differences between banks and credit unions. And more importantly that it has helped you find the right financial option for you.