Many people are still unclear on exactly what a credit union is. A credit union is a bank that is owned by the people who bank there. Credit unions were initially created because traditional banks were centered in large cities and would not service distant rural populations. Farmers would pool their money and lend it to each other for the purchase of equipment or seed. They literally “united” to create an opportunity to get credit. From the beginning, credit unions were owned equally by all of the members who participated in them. They have never had any mandate to make a profit from their members. They exist only to meet the needs of their member-owners and this leads to the first and most important reason that credit unions are a better choice for banking:
Credit unions exist solely to meet the needs of their member-owners, not to profit from them.
Traditional banks have a mandate to maximize their profits on behalf of their shareholders. If you are a shareholder in a bank this is good for you, unless you are also a customer of that bank, in which case you are contributing to the very profits you hope to share in. Credit unions are not trying to make a profit. In fact, the technical term for a credit union is a not-for-profit financial cooperative. If a credit union does make a profit beyond what is required to fund its operation, those profits are shared equally among the member-owners. With no mandate to generate profit, a credit union can focus entirely on assisting their members-owners without having to consider whether their decisions will generate profit. The benefit of this co-operative structure became more evident recently when several banks in Europe and North America were investigated for unethical or illegal sales practices that sought to extract greater fees from their own customers. Credit unions have no reason to behave in this way because they are not driven by profit.
Credit unions charge lower fees than traditional banks
Credit unions have to charge fees for their services to fund their continued operation, however, because they are not trying to make a profit, they can reinvest their excess revenue into offering lower fees for their member-owners. For example, debit transaction fees from a credit union tend to be about 40% lower than those charged by traditional banks. The same is true of interest rates. Credit unions will always offer the lowest interest rate they can to their member-owners because they are not looking to profit from that rate.
Credit unions have greater flexibility and motivation when devising solutions for their member-owners.
Credit unions were the first financial institutions to lend on the basis of the borrower’s character rather than just their credit-worthiness. If the person you are lending to is one of the people who own your credit union, it makes sense that you would do everything possible to assist them. Credit unions have the flexibility to look beyond a credit score and consider their member’s entire situation when assessing a loan or any other form of financial assistance. This makes credit unions particularly effective for small business owners who may contend with seasonal variations in revenue or unexpected expenses that seriously impact their credit score in the eyes of the big banks.
Credit Unions offer a network of over 3500 ATMs that carry no fee.
Through the Exchange™ network, credit unions offer their member-owners access to a growing nationwide network of over 3,500 ATMs that are fee-free. That is more than the number of ATMs operated by any one of the big banks. Credit unions were the first to introduce ATMs in Canada along with the first fully functional online banking and now, the #1 ranked mobile banking App in North America.
Credit Unions have been ranked #1 for customer service for 12 years in a row among Canadian financial institutions.
It is not surprising that credit unions excel at customer service given everyone they serve is an owner of the credit union. In fact, the vast majority of people who work at credit unions are also member-owners themselves; so they are really just treating their customers as they themselves wish to be treated. Unlike traditional banks, credit unions make their decisions locally so that the member is always dealing directly with the person who can get them the solution they need. Perhaps the biggest reason credit unions score so well in customer service is that they do not have customers. They have member-owners and a single mission to meet their needs.
Credit unions and banks are alike in that they are both federally regulated and the deposits of their customers are insured but that is really where the similarity ends. The big banks in Canada have a mission to make money and they make at least some of that money from their customers. Credit unions have no profit mandate and exist only to meet the needs of their members. That is why they have lower fees, higher rates of return, 3,500 free ATMs and the best customer service ranking. That is why credit unions offer a better way to bank for your family.
For more information on the benefits of banking with a credit union click on this link: YourCU.com or call 1-800-379-7757.