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What Is A Credit Union? And What Do They Do?

Most of us are familiar with traditional banks and have used one most of our lives. But there is a unique alternative to banks available to us: Credit unions. Many credit unions have been in operation for 100 years or more, offer similar services to an existing bank (chequing and savings accounts, credit cards, mortgages, and loans) but Credit unions are unique because they are member owned. When you open a credit union account, you become a member-owner of the credit union — you are both a customer and an owner.

That makes credit unions vastly different beasts from traditional banks, with their majority shareholders and decisions made by a management team not the account holders. Credit unions are not-for-profit, and each member is entitled to one vote in major decisions made by the union. A membership fee is also charged at the time you join the credit union. For example, Member Savings credit union charges $15 at the time you apply for membership and this fee allows you the right to attend all general meetings and vote on certain topics.  

Any net profit earned by a credit union is shared with its members in the form of dividend payments. For example, Vancity (established in 1946 in British Columbia) shares 30% of its profit with its members and communities. Do you remember a time when your bank shared its profits with you?

At one time credit unions were extremely focused on smaller communities, required members to relate to a specific industry or business and had fewer physical locations and a small number of ATM machines. While the focus on community has not changed, today’s credit unions are open to all who wish to join and are light-years ahead of the credit unions of twenty years ago. 

For example, Alterna Savings credit union provides access to 43,000 no-fee ATMs across North America and runs 36 local branches in Ontario. They also offer brokerage and other wealth management services to their members and their website provides access to several digital banking tools.

Community good-will is also a focus of many credit unions. Meridian Credit Union promotes a joint effort between their employees and local communities with their Good Neighbour Program. The goal is to help support organizations, activities and events that make local communities stronger.

Most credit unions are regulated at the provincial and territorial level. However, some are federally regulated. This means credit unions are required to follow similar regulations to those of traditional banks. For example, eligible deposits that are made into chequing and savings accounts are insured. This means your money is protected up to a certain deposit amount if the credit union fails, just like a traditional bank. The amount that is protected varies by province and the type of account you hold.

In Ontario, the Financial Services Commission of Ontario (FSCO) maintains a listing of all credit unions that are currently registered in the province. Other provinces and territories will have similar lists. Before you agree to join a credit union, you should ensure the credit union is registered and that a federal or provincial agency is providing deposit insurance to the union to protect your assets.

Credit unions by their very nature tend to be extremely member-friendly and accessible. One example of this (considering our current explosive real estate climate) is Luminus Credit Union, who offer a Co-op and Co-Ownership Mortgage option for buyers open to purchasing a home with a friend or family member. Luminus is one of the few financial institutions in Ontario that offers this type of flexible home ownership arrangement. Most credit unions also offer a host of online tools, from financial literacy training to remote cheque cashing using your smartphone camera and app software.

When searching for a new institution to manage your financial life, consider checking out the services at your local credit union. You may find their cooperative approach, wide range of branch locations and technologically savvy online tools ideal for your needs.

And if you need further advice on how best to locate a new bank or credit union, and the pros and cons of each type of institution, our licensed insolvency professionals can help. Click the FREE CONSULTATION button, below, or give us a call today!