Credit unions provide traditional banking services to Canadians across the country, but they are different from Big Banks in two key ways: they are not-for-profit and are owned by their customers, who are often referred to as members.
Millions of Canadians are members of a credit union, according to the Canadian Credit Union Association. Credit unions are especially popular in Quebec — often called caisse populaire — and western Canada.
How credit unions work
The first credit union in Canada opened in 1900. At the end of 2022, there were over 1,600 credit unions across the country, ranging in size from a few hundred to many thousands of members.
Because credit unions operate as not-for-profit organizations, the profits are typically reinvested into the credit union, distributed as dividends to members, or donated to the community.
Given this community-centric structure, credit unions can focus more on the customer than the bottom line. However, because credit unions don’t always have the same resources as major banks, they may not offer the same variety of products or services.
Many credit unions are provincially-regulated, meaning provincial legislations dictate how they can lend, borrow, and invest. Some are now federally chartered, and are regulated by federal legislation like other banks. Regardless of regulation structure, all credit unions are owned by their members and run as a cooperative.
» MORE: Explore the offerings of banks vs. credit unions
Credit union pros and cons
Pros of using a credit union
- Better interest rates on deposits. Your chequing and savings accounts will likely earn more interest than at a traditional bank (but perhaps not as much as an online-only bank).
- Competitive fees. One of the ways credit unions may pass profits through to customers is by charging lower account fees.
- Lower interest rates on loans and mortgages. A credit union might offer you a more competitive interest rate for mortgages, loans, and even credit cards.
- Access to a wider network of ATMs. Credit unions belong to various networks of ATMs across Canada that allow members to transact at any ATM in the network without paying fees. These networks are larger than most banks, which charge fees to use ATMs outside of the bank’s proprietary network.
- Potential for more deposit insurance. While CDIC-insured banks cap the coverage at $100,000, provincially-insured credit unions have at least that much coverage, and in some cases much more.
- Customers have a say in how the credit union is run. If you bank with a credit union, you are a part-owner. This means you will have the opportunity to vote on important matters and elect the board of directors.
- More flexible qualification criteria. Provincially-run credit unions aren’t bound to the same loan approval rules as banks, so they may be more willing to work with borrowers with lower credit scores or non-traditional employment. Additionally, some credit unions can skip the “mortgage stress test” when it comes to approving a mortgage application.
Cons of using a credit union
- Less-developed online presence. Because credit unions tend to be smaller, more localized operations, they may have less robust websites and mobile apps, with fewer services available online.
- Fewer products. You might not find the same variety of products at a credit union as you would at a bank. This means you might not have access to the specialized account types or terms.
- More restrictions. While a credit union might offer a more attractive mortgage rate, they may also restrict your repayment terms in a way that doesn’t suit your financial situation.
- Fewer services. Credit unions may or may not offer all the services you’re looking for, such as personal wealth management.
- Limited branch locations. While big banks may have branches across the country, credit unions generally have a much smaller footprint.
7 questions to determine if a credit union is right for you
Here are some questions to consider when choosing the optimal financial institution for your needs.
- What credit unions do I qualify to join? Some credit unions only serve certain professions, or people who live/work/attend school in a specific area.
- What products and services do I need? Measure your requirements against what credit unions and other financial institutions offer to ensure your financial needs will be met.
- How important is personal customer service? If you prefer to walk into a local branch and get personalized service, a credit union might be better than an online bank.
- Do I have a lower credit score? If your credit report is currently under construction, joining a credit union might give you more financing options.
- How important is online banking? If you prefer digital banking, know that not all credit unions might have the caliber of features you’re looking for.
- Is 24-7 service important? If you work odd hours or like to travel internationally, a credit union may not be able to accommodate all of your needs.
- What kind of transactions will I conduct most often? Once you define this, you can compare the banking fee structures and accessibility options across financial institutions.
Frequently asked questions about credit unions
Federal credit unions are open to all Canadian residents and federally regulated. Two federal credit unions in Canada: Coast Capital Savings Federal Credit Union, and UNI Financial Cooperation (UNI Coopération Financière). Provincial credit unions may limit membership to residents of the province or those who work in a particular profession.
Yes, credit unions are financial institutions. In Canada, types of financial institutions include the big six banks, online-only banks, caisses populaires, and credit unions.
Canada’s largest financial institutions are often called the “Big Five.” But references to the “Big Six” have become common. Which one is right?
Opening a bank account is easy and fast. Make sure you have two forms of identification ready. Once your account is open, you will receive a debit card and can start using it right away.