Credit Unions Have An Edge Over Banks Higher Rates On Savings, Lower Rates On Loans, Friendlier Service

If you’re not already a member of a credit union, consider joining one. Credit unions are what banks would be if every customer was a shareholder.

Most credit unions offer higher interest rates on savings accounts and charge lower rates for loans than banks. While banks are owned by shareholders and must earn profits to maintain the dividend and share price, credit unions are locally owned, non-profit organizations. If profits do arise, they are reinvested in the credit union, paid out to members, or donated to local charities.

Each credit union member gets a vote, and its board is made up of volunteers.

The history of Canadian credit unions can be traced to one man: Alphonse Desjardins, a journalist turned House of Commons stenographer who launched the first caisse populaire in Lévis, Québec at the turn of the twentieth century.

At the time, banks had little interest in small borrowers, who were forced to seek loans with the turn-of-the-century equivalent of loan sharks. In 1897, Mr. Desjardins heard of a case in which a borrower had to pay $5,000 interest on a $150 loan. The usury inspired Mr. Desjardins to spend three years researching European co-operative savings and credit systems before launching the Caisse Populaire de Lévis, a “people’s bank” in 1900. Not surprisingly, it was a huge success in its community.

Over the next 17 years Mr. Desjardins toured Canada and the United States, setting up local caisse populaires and giving speeches and presentations advocating their use. By the time he died in 1920, there were 187 credit unions in Québec, 24 in Ontario and nine in the United States.

The popularity of credit unions has continued and today there are about 700 credit unions in Canada, with most concentrated in Quebec and the western provinces.

For the past 16 years, Canadian credit unions have ranked first for customer service in a survey conducted by market researcher Ipsos.

Small business owners also prefer credit unions over banks. A 2020 poll of 11,599 small businesses by the Canadian Federation of Independent Business (CFIB) measured respondents’ satisfaction with their financial institution in the areas such as fees and clarity of statements. Credit unions achieved the highest scores, the CFIB said.

Of course, credit unions have fewer branches and generally don’t offer an array of online financial services and apps like banks.

Canada’s early credit unions often required their members to come from specific ethnic groups, religions, or occupations but these “closed bond” credit unions are rare today. Of the 700 or so credit unions in Canada, only five per cent restrict their memberships to specific occupations— police, teachers, firefighters, municipal employees and so on—while just one per cent still require their members or their families to have some connection to an ethnic group, says a background paper from the Canadian Credit Union Association (CCUA). Most provincially regulated credit unions require their members to reside in the province where the credit union operates, but federal regulated ones are open to all Canadian residents, the CCUA paper says.

Most credit unions are governed by provincial laws and members’ savings are protected by provincial bodies, while members in two federally governed credit unions—Coast Capital Savings in British Columbia and UNI Financial Corp. in New Brunswick—have their assets protected by Canada Deposit Insurance Corporation (CDIC).

Québec’s Desjardins Group is by far the largest credit union in Canada. The original Desjardins has expanded to dominate Québec, with 7.5 million members and clients holding $362 billion in total assets. A full 48,930 people work at its 219 caisses in 183 towns and villages. Desjardins Group redistributed $445 million to its members and local communities in 2020.

Credit union branches often resemble small-town bank branches of years ago. They have fewer branches and ATMs than major Canadian banks, may close early on weekdays and may not be open at all on weekends, while their online banking services may be relatively primitive and their apps nonexistent. However, credit unions may fit the bill for those looking for higher savings rates, lower rates on loans, a focus on local charities and a friendly atmosphere. For the best of both worlds, you can have accounts at both banks and credit unions.

Here are the largest credit unions for each province and Atlantic Canada, excluding Québec, based on recent figures from each credit union.

British Columbia

Vancouver City Savings Credit Union or Vancity was set up by 14 founding members in 1946 and has since grown to be Canada’s largest credit union, with 543,621 members served by 55 branches, and $28.2 billion in assets.

Coast Capital Savings is Canada’s third largest credit union and the largest by membership, with 543,000 members holding $25.4 billion in assets, served at 52 branches. Coast Capital was created with the merger of Pacific Coast Savings on Vancouver Island, Richmond Savings, and Surrey Metro Savings between 2000 and 2002.

First West Credit Union has $15.5 billion in assets held by 250,000 members at 46 branches.

Alberta

Servus Credit Union is the fourth largest in Canada, with $17 billion in assets held by 380,000 members served at more than 100 branches.

Saskatchewan

Conexus Credit Union is the tenth largest in Canada, with more than 131,000 members served at 30 locations. Conexus has $9 billion in assets.

Manitoba

Steinbach Credit Union is Manitoba’s largest credit union and the eighth largest in Canada, with about $9 billion in assets held by more than 100,000 members, although it has only three branches, two in Winnipeg and one in Steinbach.

Ontario

Meridian is the second largest credit union in Canada and the largest in Ontario, with more than 370,000 members holding $27.2 billion in assets through 89 branches.

Desjardins Ontario, the sixth largest credit union in Canada, has $8.47 billion in assets held by 130,000 members at 57 locations, figures from the Canadian Credit Union Association show.

Alterna Savings and Credit Union, the ninth largest in Canada, has 36 branches serving more than 185,000 members who together hold $10 billion in assets.

New Brunswick

UNI Financial Corp. has 155,000 members holding $4.8 billion in assets, served by 43 branches.

Nova Scotia

East Coast Credit Union serves about 42,000 members from its 21 branches and Credit Union Atlantic in Nova Scotia has 20,000 members served from eight branches.

Two other Atlantic Canada credit unions are the Newfoundland and Labrador Credit Union (20,000 members served by 12 branches) and Provincial Credit Union (14,500 members and four branches) in Prince Edward Island.

Richard Morrison, CIM, is a former editor and investment columnist at the Financial Post. richarddmorrison@yahoo.ca