Banks versus Credit Unions

By: Mark Lukwinski

Banks versus Credit Unions

Tags: Banks, credit unions, financing, money

If you’re looking to make a home purchase in Calgary in 2019, you may be scanning the markets to understand what you can afford and who will give you the best rates. Along your way you’ve perhaps wondered about approaching a Credit Union rather than a bank, so we thought we would shed some light on the differences between a credit union and a bank.
 
The biggest difference between these two types of financial institutions is that banks are for profit, credit unions are not. A bank will lend you a funds at a higher interest rate because a bank will incur a profit after providing a service to customers. That profit will also be paid as a dividend to stockholders. In the case of credit unions, they are not-for-profit which means they do not pay out dividends, and exist to serve their members. 
 
Banks are regulated by the federal government whereas credit unions are governed by provincial governments which dictate how they are to borrow funds to their customers. Though both institution types are legislated by the Bank Act, who they are overseen by differs. 
 
There is no discrepancy in the type of customers either institution can serve, anyone can open an account at either a bank or credit union. However, credit unions tend to be located in more rural areas and communities not normally served by bigger banks. Banks are more national, credit unions tend to be more geographically restricted. 
 
To join a credit union, customers purchase a membership or a share, which permits them to vote on organizational issues and also receive dividends from shares owned. In banks, dividends are paid to investors, not members or customers. 
 
There is more variety at a bank and the kind of investment vehicles and account types that they offer, even though both types of institutions offer essentially the same thing. At both institution types you can get mortgages, so it’s worth really exploring and looking around to see what you could receive to finance your home if 2019 is going to be YOUR year of finding your dream home. We’d love to help be a part of that, please do get in touch with any real estate questions you may have.
 
Mark