Banker's View : Bank vs Credit Union

 Both are Financial Institutions, however, they have major differences. 

Here are the major differences:

1. Safety of your money 

By safety I mean, in case a financial institution goes bankrupt, how much of your money is safe.

A Credit Union insures 100% of your money. Other than money sitting in equity markets of course.

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Federal Banks are only insured up to $100000 of your money in an account. If you want another $100000 coverage you will have to make accounts joint with another person, which will then give you another $100000 coverage. This of course means you will lose ownership of your funds as well. 

In a Bank Money sitting in the following is insured up to $100000 for each of these items:

• Bank account in your name 
• Bank account in joint name 
• TFSA 
• RRIF
• RRSP
• In Trust accounts
• GICs  with a term not exceeding 5 years 

Keep in mind that you have unlimited insurance coverage for the above with a credit union, no matter how much sits in any of these accouts. 

Your US dollar account or any other currency account with the banks are not insured either.

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With the Credit Union they are 100% insured all of these, USD accounts with accrued interest and GICs longer than 5 years.


2. Fees 

This is a HOT topic !

All financial institutions have different ways their bank accounts and plans are setup. Banks usually have higher fees and account operating cost.

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With most of the credit unions, you will probably get a free chequing account with no minimum balance to keep and no restriction on how many transactions you can do on the chequing account. If you are out side the province you can still you another credit unions ATM network.

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A bank might charge you a fee if you go over a certain number of transactions. Or if you do not maintain a minimum balance in the account for the whole month (each and very single day, yup).

For example, if you look at Bank of Montreal "Practical Plan" you get to use the account 10 times in a month. Any time you go over the 10 transactions you get $1 fee per transaction. Plus, there is a monthly fee of $4.00. If you have $1000 in the chequing account for the whole month (every single day) you then get to wave the monthly fee of $4.00.

Now keep in mind, some banks offer free unlimited transactions and no monthly fee only if you keep lets say $5000 in the account as a minimum balance or if you have all your business with them. 

Note: $5000, I think is too much to keep in a chequing account and not get any interest on that chuck of money!!

Most banks offer a no monthly fee plan for student or youth, but they are limited to how many times they can use that account. Also, when this youth turns 18 or 19, the same fees would apply as I have talked above. 

So always know what you are getting inside and out! 

3. Guaranteed Investment Certificates (GIC) or Term Deposits 

In my experience Credit Unions offer better rates compared to Banks. I have worked in both and I can compare using my experience. Even when it comes down to Mutual funds, the Management Expense Ratio(fees) are probably lower with a credit union. 

Note: Less fees for a Mutual Funds does not mean that you make a lot of money. It depends on the quality of the mutual fund. Another session will come regarding this. 

4. Technology and Resources

One of the main advantage for the banks is that they are big and have lots of resources to spend on technology. They are much ahead of the credit unions in that way. However, now a days, there is a big push towards online banking and technology in banking. Credit Unions are also investing in the technologies. 

Banks usually have their own Wealth management departments and stock trading plat forms. Most credit unions might have out side partners that they work with. However, if you have basic banking needs a credit union will much much lighter for you when it comes down to fees. 

5. Banks have Shareholders while Credit Unions have Members 

To Join a credit union you will have to deposit a small amount of money (usually $5 or so), called the members shares. These shares allow you to vote for board of directors. 

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A Bank has shareholders and they can be any where in the world. So the banks main objective is to increase the share price. Therefore, they need to have those fees in place to earn revenue.

6. Credit Unions Operations 

A credit union can operate in a province only, unless they had got the license to operate in other provinces and they are regulated provincially. 

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Banks are regulated Federally. 

There are other difference as well, however, its time for a coffee break...