Looking to switch banks? Unlike in the United States where there are over 4000 banks to choose from, there are only five main banks in Canada. For individuals that believe that all banks are the same, there is an alternative financial institution that should be considered. A credit union.
On the surface, banks and credit unions offer the same products and services in the form of savings and chequing accounts, personal loans, credit cards and mortgages, however; there are clear differences between the two entities to understand before switching institutions.
Here are 7 things that you should know about credit unions.
1. Who owns a credit union?
Unlike banks that are publicly traded companies on the stock market, credit unions are financial cooperatives that are owned and controlled by its members. Credit unions are nonprofit organizations that strive to provide service over profitability, however; they must make sound financial decisions on behalf of its members.
2. How are clients viewed by a credit union?
Each user of a credit union is defined as a member of the cooperative and not as a client. A membership in a credit union brings with it certain advantages in the form of: higher interest rates on saving accounts, low interest loans and credit card rates and fewer service fees.
3. How do you become a member of a credit union?
Credit unions have their own respective procedures for individuals to follow in order to become a member. Caisse Desjardins, the largest credit union in Quebec, has different steps to perform depending on your situation based on the reasons that you wish to join. For example, if you are switching from a bank to one of the credit union’s branches, you are asked to make an appointment with an advisor and complete the “Desjardins Quick Transfer” authorization form.
4. What are the responsibilities of being a member?
Once you have been accepted as a member of a credit union, you have specific responsibilities to meet. Being a part of a cooperative, you are asked to attend and participate in annual general meetings where issues regarding the future initiatives of the credit union are discussed and voted on. In addition, you will be asked to support local initiatives that your branch undertakes in the area. Your support can be in the form of promoting the initiatives and attending events.
5. Where can you find a credit union branch?
Due to the fact that credit union is a financial cooperative, branches are really embedded in the communities in which they serve and fund initiatives. As a result, you will not see very many branches throughout a city like a regular bank. To find the closest branch, visit the credit union’s website.
6. Are deposits safe in a credit union?
Since credit unions are in existence to manage money of its members, all deposits in credit unions are safe. Credit unions have their own cash reserve in case of financial difficulties. In Quebec, Caisse Desjardins has a reserve of $750 million and through the Autorité des marchés financiers (AMF), credit union members’ accounts are insured for $100 000. This is the identical amount of money that Canadian banks insures their clients’ deposits.
7. How competitive are credit unions versus other banks?
Even though there are financial cooperatives, credit unions are quite competitive with other banks from a member’s point of view. Credit unions offer the same basic products and services as banks at the same or more favorable rates. If individuals are looking for a more extensive selection of products or services, chances are that credit unions will not be able to meet that need.
In times where individuals are seeking to get more from their savings and pay less in interest on loans and credit cards from a traditional bank, a credit union is a viable alternative to consider. Becoming a member means knowing what you will be getting from the credit union before you put your money into an account.
Did you know that November is Financial Literacy Month across Canada? Financial Literacy is a very important skill as it allows you to manage your money and make informed daily decisions with your finances. On Friday November 22nd, 2013 various partners in the field of Financial Literacy will be hosting CONNECT WITH FINANCIAL LITERACY 2013. For more information, please click here.