In Canada, there’s a difference between a Bank And A Credit Union. When it comes to keeping your money stashed in a safe place and taking advantage of financial products, the local big banks become very important for many Canadians. While banks serve their purpose, they certainly are not the only financial institutions available for consumers to do their banking.
Another popular institutions are the Credit unions, Canadians receives many of the same types of financial products and services from them. It is important for consumers to know the difference between the two before they choose which entity to entrust with their money.
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Profit Versus Non-Profit
Banks are for-profit organizations. Every transactions made with a bank is done for the purpose of profit making as well as providing good services to customers. All earnings are usually paid back to members and stockholders. Banks earns money by lending funds at interest rates and are usually higher than the cost of the money loaned. In particular, banks make money in interest from loans and interest payments from securities they own.
Credit unions are not-for-profit institutions. They don’t make their money in the same way that banks do. They are not out to make a profit, but rather they operate to serve their members. Credit unions don’t pay dividends to outside stockholders as is the case with banks.
Big banks are overseen by the federal government, which is also tasked with monitoring foreign banks that operate within Canada. Banks are legislated by the Bank Act.
Majority of credit unions are governed by their respective provincial governments that dictates how they’re permitted to borrow, lend, and invest. Though credit unions are member-owned while some are members of the Canadian Credit Union Association. Credit unions are also legislated by the Bank Act.
There is no real difference between the types of customers that are served by banks versus credit unions. Any Canadian who has the appropriate identification is eligible to open up an account at either financial institution.
However, consumers should understand that credit unions tend to have stricter rules regarding who deserve their services at a particular locations. Normally, credit unions only serve those located within a specific geographical area. Credit unions usually have branches in more rural areas and communities that are not well served by bigger banks.
Membership at credit unions typically requires the purchase of a share and the ability to meet certain requirements. As a shareholder, members are given the power to vote if there is ever an issue regarding how the organization is being operated. Members also benefits from dividends derived every year from the shares owned. At banks, shareholders are typically investors, not members or necessarily bank customers.
Credit unions and banks don’t differ very much in terms of the types of accounts that members can open. Products such as savings accounts, checking accounts, loans, mortgages, credit cards, wealth building, retirement, and investment products are all offered at both types of institutions.
In fact, banks tend to offer a wider variety of account and product types compared to credit unions. In addition, they also tend to be more focused on commercial loan products and others that are more likely to bring in a sizable income. On the other hand, credit unions are more focused on smaller consumer loans.
Credit unions have boards that are made up of volunteers who have been voted in by members. That means actual customers of a credit union can also be voted for to be on the board. On the other hand, shareholders appoint and pays board members at banks.
Credit unions are more cooperative in nature and tend to share their resources and work together. Members are allowed to use the services and machines of other credit unions, no matter the location, free of charge, provided they’re part of the same financial institution.
Large banks are usually up to date with the latest in banking technology and tend to offer many convenient online and mobile app services to customers. Banking apps can be used on tablets and smartphones, so clients can do their banking on the go wherever they happen to be which can also be convenient and saves a lot of time.
The same can be said for credit unions. In fact, credit unions offer the same level of innovative technology to their members that is comparable, if not better than what traditional banks have to offer.
Banks charges are usually higher than those charged by credit unions, especially the larger banks in the country.
You can also see the type of banking services immigrants needs to think about.