Credit Unions Vs. Banks In Canada
Credit unions and banks are governed in distinct ways. This blog will explain the difference between credit unions and banks. keep reading to know more.
You may be unsure whether to use a bank or a credit union for your finances. To decide, you need to assess the advantages of one over the other. Also, the one that meets your needs.
The answer lies in your financial circumstances, needs, and wants. We will illustrate everything you need to know about credit unions and banks, including their benefits and drawbacks, to help you make an informed decision.
What are credit unions?
We all know what a bank is. Unlike banks, a credit union is a non-profit organization. It offers services like banks, along with some special services for its customers. We will come to that in a bit, but first, a quick look at the similarities.
Customers can open savings and checking accounts at credit unions, just like they can at banks. They also provide loans and advances to their customers. They offer credit and debit cards.
Similarities between banks and credit unions
They fall under the same governing authority, with similar regulations for mortgages and credit products. Hence, these two institutions must offer several similar services and features. We list some similarities between banks and credit unions below.
- An account for saving money.
- A chequing account.
- Loans and advances.
- Plastic Money.
- Mobile Banking.
- ATM/ABM accessibility.
Difference Between banks and credit unions.
Let us now look at the point of contention between the two financial entities.
Ownership
Banks are owned and managed by their stockholders or private entrepreneurs. Credit unions are owned and operated by members of the credit union who formed them. They essentially work as NGOs.
Membership
Anybody can become a customer or a member of a Bank if they meet the criteria specified by the bank.
Members of a credit union belong to a similar group as a cooperative, based on a similar industry or locality.
Customer Service
The customer service of banks is prompt, with dedicated employees appointed to solve queries of their customers around the clock. Banks even deploy dedicated Relationship Managers to take care of their prime customers.
Credit unions also provide excellent customer service. But they have fewer dedicated employees to attend and cannot offer personalized attention to all.
Interest Rates
Both banks and credit unions have a similar rule, but you can find the differential interest rate on loans and interest on deposits. The interest rate on loans is low with credit unions.
Fees
Although the banks charge higher fees than credit unions, they provide a wide range of products and services compared to CUs.
CUs charge lower fees and provide fewer products and services as compared to banks.
Security
The financial system in Canada is comparatively safe since it is well-regulated. Every financial or banking organization in Canada is safe because the Federal Deposit Insurance Corporation (FDIC) controls it. National Credit Union Administration (NCUSIF) controls the Credit unions and is safe too.
We understand that choosing between the two could be difficult because most of the financial products and services they offer are nearly identical.
Those looking for a lower interest rate on their loans prefer credit unions. The fees charged are also lower, which is a discerning factor for many borrowers.
Banks are for people who travel across the country and require a vast network of ATM/ABMs spread throughout the country. They prefer banks for other advanced features like net banking and 24/7 customer service.
