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 5 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 1-5, with shares costing around $5-$25 each. Low-income individuals may be accommodated 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.
As a matter of fact…
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 – named the Caisse Populaire de Lévis – was created by Alphonse Desjardins who co-founded the Desjardins Group, the largest federation of credit unions in the world.
How are credit unions different from banks?
Credit unions offer a full range of banking products and services for both individuals and businesses. However, compared to big banks, there is often less variety in the number of options to choose from for each product or service. Still, you can generally expect to find everything that regular banks offer such as:
Debit and credit cards
Student loans and student accounts
Lines of credit
Both secured (with collateral) and unsecured (no collateral) loans
Multiple options. Most credit unions offer multiple savings account options to suit the varying needs of its customers. Options can include regular savings account, high interest savings accounts, TFSAs, RRSPs and GICs.
Lower fees. Since credit unions are nonprofit institutions that reinvest profits back into the business rather than distributing them to stakeholders, fees for services and accounts are often lower than banks.
Competitive rates. Many credit unions offer interest rates that are comparable – if not beyond – rates offered by traditional banking institutions.
Personalized experience. Credit unions are smaller and sometimes more localized than big banks, allowing them to offer a more personal approach to banking.
Credit union savings accounts
Steinbach Credit Union Tax-Free Savings Account
Interest earned is tax free.
Contribution limits apply as per federal regulations.
All deposits are free, and withdrawals are $3.00 each (first one is free).
Mobile app available for Android and iOS.
Steinbach Credit Union Regular Savings Account
2.4% on balances less than $100,0002.5% on balances between $100,000 – $249,9992.7% on balances over $250,000
All deposits are free, and withdrawals are $1.00 each (first monthly withdrawal is free).
Mobile app available for Android and iOS.
Parama Daily Interest Premium Savings
Offers unlimited deposits and withdrawals.
Mobile app available for Android and iOS.
Meridian Credit Union High Interest Savings Account
Promotional interest rate of for the first
Offers unlimited, free transactions, including deposits and withdrawals.
Mobile app available for Android and iOS.
Innovation Credit Union Savings Account
Offers 6 free debit transactions per month ($5.00 per transaction thereafter), including deposits and ATM withdrawals
Mobile app available for Android and iOS
Vancity Jumpstart High Interest Savings Account
All deposits are free, while debits and withdrawals are $5.00 each
Full-service mobile app available for Android and iOS
What are the risks of joining a credit union?
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:
Limited presence. Due to the smaller size of most credit unions, you might experience some inconvenience when you want to visit a physical location and can’t find one that’s very close to you.
Membership fees. Most credit unions require you to pay a membership fee or purchase shares of the credit union in order to join.
Less tech-savvy. Some credit unions may not have the resources to invest in expensive technology like well-designed mobile banking apps. However, most do offer online banking, and some of the bigger, more established credit unions like Vancity, Meridian and Capital Coast have invested in making full- or nearly full-service apps that are comparable to mobile apps made by big banks.
What are the advantages of a credit union over a bank?
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.
How to compare credit union savings accounts
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 – $25 each, and you are usually required to purchase 1-5.
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.
Option for a linked account
It’s common to link savings accounts to a standard cheqing 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.
Minimum balance requirements
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.
Questions to ask when choosing a credit union
If you’re thinking about joining a credit union, consider the following factors when making your decision:
Does the credit union have a branch that’s close to you?
Does it offer the accounts, credit cards and services you require?
Does it charge many fees and/or expensive fees on its products?
How long has it been established? Does it have a good reputation?
Does it have a mobile app? Does the app have all the functionality you need on the go? Does it get good reviews?
Can it offer prompt and friendly customer support whenever you need help?
Is it regulated by any outside institution? Are your finds insured?
The biggest credit unions in Canada
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.
Vancity (Vancouver City Savings Credit Union, BC) — $23.16 billion
Meridian Credit Union Limited (ON) — $20.96 billion
Coast Capital Federal Credit Union (BC) — $20.23 billion
Servus Credit Union (AB) — $16.31 billion
First West Credit Union (BC) — $11.03 billion
Steinbach Credit Union (MB) — $6.93 billion
Conexus Credit Union (SK) — $6.55 billion
Alterna Savings and Credit Union Limited (ON) — $6.14 billion
Affinity Credit Union (SK) — $5.96 billion
Connect First Credit Union Limited (AB) — $5.79 billion
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.
No. However, credit unions are regulated by provincial institutions and are insured by such institutions or else by non-governmental entities. The amount of coverage provided by insurers may vary for different credit unions, unlike banks insured by the CDIC, which are always covered up to $100,000 for each account-holding customer. Funds deposited into accounts at some credit unions may actually be insured for much higher amounts than what the CDIC covers.
Visit the Canadian Credit Union Association for more information on what credit unions operate in Canada, how credit unions are regulated and what sets these institutions apart from traditional banks.
No, many credit unions are very open and flexible with their membership criteria. Some will allow family members and friends of union members to join, while others are open to everyone.
While financial products vary from one credit union to the next, most offer the same products that banks do, including home loans. See the list above showing some of the banking products and services that credit unions typically offer.
Stacie Hurst is an editor at Finder, specializing in loans, banking products and money transfers. She has a Bachelor of Arts in Psychology and Writing, and she completed one year of law school in the United States before deciding to pursue a career in the publishing industry. When not working, she can usually be found messing around with games, photography or floral arrangements in memory of her former days as a flower shop assistant.
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