Are credit unions better than banks for building up your savings? With higher interest rates and a members-only structure that gives each customer more power over their money, there are plenty of reasons why you might want to use a credit union savings account to help build your wealth or to simply set aside funds for a rainy day.
There are a lot of credit unions in Canada to chose from, which altogether hold billions of dollars in assets. You might’ve heard of some of the biggest players in the game: Vancity, Coast Capital Savings, Servus, Meridian and Assiniboine, among many others.
Sometimes referred to as “cooperative banks” or “people’s banks,” credit unions were initially created to take away high fees and barriers to banking. Today, however, credit unions are made to suit anyone’s financial needs and over five million Canadians prefer these institutions over big banks.
There is no credit check required to join a credit union, but usually, you must purchase a small number of “shares” in the union to become a member. The number often falls between one and five, with each share priced between $5 and $25. Keep in mind that low-income account holders may request accommodation — to waive the cost of a membership share purchase — if they can’t meet the minimum purchase requirement.
Some credit unions are made only for certain groups of people (such as agricultural workers or teachers) or for people living in specific regions. You should know that balances held in credit union accounts are not insured by the Canada Deposit Insurance Corporation (CDIC), but they’re similarly insured by provincial institutions or non-governmental entities.
The first credit union was created in 1852 in Germany, and by 1901, the first credit union in North America had opened its doors in Quebec. This union — known as Caisse Populaire de Lévis — was created by Alphonse Desjardins who co-founded the Desjardins Group, the largest federation of credit unions in the world.
Credit unions offer a full range of banking products and services for both individuals and businesses. In this way, there is a great deal of similarity between credit unions and banks. One big difference, however, is that many credit unions will have membership requirements — either a geographical or professional requirement, or a prerequisite member-share purchase in order to get access to the credit union’s services and products. Still, you can generally expect to find everything that regular banks offer such as:
Though credit unions may have a more limited list on the types of banking accounts offered, common saving solutions offered by almost all credit unions include Tax-Free Savings Accounts (TFSAs), Registered Retirements Savings Accounts (RRSPs), Guaranteed Investment Certificates (GICs), and savings accounts with competitive interest rates.
| Savings account | Interest rate | Minimum balance | Account highlights |
|---|---|---|---|
| 3.8% on balances less than $100,000 3.85% on balances between $100,000 – $249,999 4% on balances over $250,000 | $0 |
|
| 3% | $0 |
|
| 2.5% | $0 |
| |
| 1.8% | $0 |
|
| 1.8% | $0 |
|
Vancity Jumpstart High Interest Savings Account
Get a 4.80% promotional rate on the Jumpstart High Interest Savings account until June 30, 2023. Eligible on new deposits only. Conditions apply.
Alterna Bank No-Fee eChequing Account
Get up to $400 in a cash bonus when you open an eligible account and complete the qualifying criteria. Offer ends December 31, 2023. Terms and conditions apply.
While credit unions may not be as familiar to the public as big banks and may therefore lack the widespread public acceptance and trust that big banks enjoy, credit unions are still provincially regulated and insured so that your money is safe. Still, there are a few disadvantages that you might want to consider when deciding whether to open a savings account with a credit union:
Compare the best online savings accounts
Since credit unions are owned by customers, you might find that the fees are lower than what a bank offers. Minimum deposit requirements are often lower and interest rates are often higher, making it easier to start growing your funds.
Before you can compare savings accounts offered by credit unions, you’ll need to make sure you’re eligible to become a member. Some credit unions have membership requirements based on your location or occupation, while others may allow anyone to become a member. Once you narrow down your choices, you can begin to compare features of each savings account.
Make sure you’re eligible to open an account at the credit union you’re considering. Eligibility requirements vary by institution and can include age, occupation and the location of your residence. Shop around to find one that’s right for you.
Credit unions will often require you to purchase shares of the union or pay a membership fee to join and open an account. Shares typically cost no more than $5 to $25 each, and you are usually required to purchase between one and five member shares.
Once you’ve narrowed down your options, check the interest rates for the savings accounts you’re interested in and ensure they’re competitive with what you’d find at a traditional bank. Note any aspects such as minimum balances or tiered interest rates that would affect your plans to save.
Also remember that promotional/introductory rates will not last forever — if a credit union promises a great interest rate that only lasts for a limited time, make sure you know what the long-term rate is and that you’re comfortable with it.
Check for any fees that might come with the account, including monthly maintenance, penalties for not maintaining a minimum balance, ATM charges or excessive withdrawal fees. Credit unions may also charge for Interac e-transfers, cheques, in-person service at physical locations, wire transfers and other banking functions, although the terms of your savings account may permit some or all of these charges to be waived.
Some credit unions offer online banking or mobile apps to give you greater access to your account. You should also consider how many branches and ATMs you’ll have access to, and how far the nearest location is. Many credit unions partner with existing banks or other financial institutions to allow you to use a network of ATMs across the country.
It’s common to link savings accounts to a standard chequing account so that you can easily transfer funds from one to the other. If you don’t want to open a chequing account at the same credit union, you’ll need to check if you’re allowed to link your savings account to an account at another institution.
To avoid minimum balance fees, look at accounts that have no requirements for how much money you must keep in your savings account. If you decide to open an account that requires a minimum balance, be sure to keep your balance above that level to avoid charges.
If you’re thinking about joining a credit union, consider the following factors when making your decision:
Below is a list of the top 10 largest credit unions in Canada by assets as of the fourth quarter of 2019. Collectively, these credit unions have over 2.7 million members and hold over $123 billion in assets.
If you’re looking for a personalized, no-frills banking experience or just want an alternative to big banks, then a credit union may be just the ticket. Most offer products with competitive rates and minimal fees, allowing you to grow your savings and reach your financial goals faster. Eligibility requirements are stricter than with traditional banks, however, and branch availability is often limited.
Before making a final decision, compare your options with our guide to savings accounts.
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