A credit union is a provincially or federally regulated non-profit financial institution owned by its members, similar to a bank.
Like a bank, credit unions offer a range of financial products and services like chequing and savings accounts, loans, mortgages, investment options, and credit cards.
However, there are a few critical differences between credit unions and banks that you should be aware if prior to joining one.
How Do Credit Unions Work?
Credit unions are owned and operated by their members.
Revenues generated by these institutions through regular financial activities like account fees and loan interest are issued to their members as dividends and invested back into the union.
These revenues are also used to support the needs of their communities.
What Are the Requirements to Join a Credit Union?
Once you open an account with a credit union, you become a member and part-owner of the institution.
As a member, you can vote to elect the board of directors and input into how the organization operates.
Because of this, there are often requirements to join a credit union.
While each credit union has different requirements, most require regular information to open a bank account, like proper identification and financial history.
Most credit unions also require you to invest a nominal amount of money into the institution, usually as a share purchase program.
This purchase amount can be low, sometimes only a few dollars.
Since most credit unions are local to a particular area, many will require you to be a resident of the community where they operate.
Advantages of Credit Unions
There are many reasons why so many Canadians choose credit unions over banks.
These reasons include:
- Loans and credit cards with lower interest rates
- Earning higher interest rates on chequing and savings account deposits
- Lower account fees and transparency into where your bank fees are going
- Contributing to the needs of your local community
Disadvantages of Credit Unions
While there are many great things about credit unions, there are also reasons why many choose to stay with traditional banks.
These include:
- Fewer product and service offerings in terms of credit cards, mortgages, loans, account types
- Membership is mandatory
- Fewer branch locations
Did You Know?
Over 5.8 million Canadians choose a credit union for their everyday banking over traditional banks?
