Written by Vanessa Santilli on March 25 on CreditCards.ca
Canadians, mostly lured by lower fees, have increasingly turned to credit unions. But leaving banks means giving up their many locations and banking options.
According to a year-end 2013 report by Credit Union Central of Canada, the Canadian credit union system is growing. Credit union members now total 5.3 million.
Cost is a major driver. “The big banks have higher bank fees than credit unions, basically because credit unions are non-profit financial cooperatives,” explains Patricia White, executive director of Credit Counselling Canada . “Credit unions often provide more personalized service and focus less on profits than banks, [which] need to keep their stock prices up for investors at home and internationally.”
In the sample of fees charged by four Canadian credit unions and four banks below, credit union chequing fees are lower than those charged by banks, though the range of credit card interest rates offered by the institutions is similar.
Customer service is another reason many Canadians are choosing credit unions over banks.
In 2013 awards given by market research firm Ipsos Reid based on surveys of nearly 46,000 Canadian households, credit unions won the overall customer service excellence award for the ninth straight year. They also won the “values my business” category.
Because credit unions are non-profit and community based, consumers may feel credit unions have their interest in mind more than banks do. Meridian Credit Union, for example, offers a no-bounce service that calls customers if a cheque is about to bounce.
Credit unions may also be less pushy when it comes to selling specific products. Dave Schurman, chief operating offer at First Ontario Credit Union, says his organisation recommends consumers use credit cards for convenience and loyalty points, but not to maintain balances. “If you need credit, the best thing to do would be to get a lower cost loan at your bank or credit union — not run up a credit card,” he says
Trade-offs
There are some things that banks offer that credit unions can’t, though. A major benefit of dealing with banks is accessibility. Consumers should be aware credit unions may have fewer branches and ATMs than the major banks in Canada, says White.
Due to their size, banks are also able to continuously add new innovations.
“Canadians can access banking services throughout the country through a network of over 18,000 bank-owned ABMs and over 6,000 branches in addition to secure online, telephone and mobile banking that allows them to bank and pay bills from virtually anywhere in the world,” says Maura Drew-Lytle, director of media relations and communications for the Canadian Bankers Association.
To view a comparison chart looking at rates with credit unions vs banks, click here.