When it comes to retail banking in Canada, customers have two options – credit unions and banks. The banking sector in the country is dominated by “The Big Five”: Canadian Imperial Bank of Commerce (CIBC), Bank of Montreal (BMO), Scotiabank, Royal Bank of Canada (RBC), and TD Canada Trust.

While most Canadians manage their finances through these banks, there’s also another alternative: credit unions.

Although both banks and credit unions offer essential financial services, they operate under different models that cater to distinct sets of needs and preferences. In this article, we’ll understand the fundamental differences between credit unions and banks in Canada so you can make informed financial decisions.

What is a Credit Union?

A credit union is a financial institution that operates on a cooperative model. This means it is owned and controlled by its members, who are also its customers.

Unlike traditional banks that aim to maximize profits for shareholders, credit unions reinvest the profits into the community in the form of lower fees, better interest rates, and improved services. These are not-for-profit institutions that prioritize serving their members’ financial needs and supporting local communities.

As of December 2022, the Canadian Credit Union Association reported a total of 420 credit unions and caisses populaires within the Canadian credit union system. Among these are 207 credit unions with 1,669 locations, serving over 6 million members, and 213 Desjardins caisses populaires with 530 locations, catering to nearly 5 million members. In total, the credit union system in Canada comprises over 10 million members.

Difference Between Credit Unions and Banks

While both credit unions and banks offer similar financial services, they have several key differences. These include:

1. Operation

One fundamental difference in the operation of credit unions versus banks lies in their organizational structure. Credit unions are member-owned cooperatives, where each member has an equal say in major decisions, regardless of the amount of money they have deposited. This ensures that the operations and policies of the credit union align with the needs and interests of its members.

Banks, on the other hand, are corporations owned by shareholders, where voting rights are based on the number of shares one holds. This influences the operations of a bank to prioritize profitability and shareholder returns. This difference in operation impacts how each type of institution serves its customers and conducts business.

2. Types of Accounts

Credit unions and banks both offer a variety of accounts. However, there are differences in the features of these accounts. Credit unions often provide more favourable terms on their accounts, including lower fees, higher interest rates on savings, and lower rates on loans. This is possible because of their not-for-profit nature, which allows them to prioritize member benefits over profit.

On the other hand, banks may offer a broader range of account types and financial products, but typically with higher fees and interest rates. Similar to banks, credit unions maintain physical branches and ATMs, offering access to comparable basic financial products such as chequing and savings accounts. Additionally, you can utilize credit unions to open Registered Retirement Savings Plans (RRSPs) or Tax-Free Savings Accounts (TFSAs) and invest in securities for your future.

3. Deposit Insurance

Both credit unions and banks in Canada offer deposit insurance. However, the scope and source of this insurance varies. Credit unions are typically insured by provincial deposit insurance corporations. This means that the coverage limits and terms can vary depending on the province in which the credit union operates.

For instance, deposits made by members of the Northern Credit Union are protected by the Financial Services Regulatory Authority of Ontario’s Deposit Insurance Reserve Fund, while deposits at Access Credit Union are fully guaranteed by the Deposit Guarantee Corporation of Manitoba (DGCM).

However, banks are insured by the Canada Deposit Insurance Corporation (CDIC). It is a federal entity that provides deposit insurance of up to $100,000 per eligible account.

4. Membership

To use the services of a credit union, one must be a member. These members are typically individuals that share a common bond like living in the same locality or working in the same industry. This not only makes members co-owners of the credit union but also gives them voting rights in decisions about the organization’s operations.

Banks, on the other hand, do not require membership. Customers of banks are just that—customers with no ownership stakes or voting rights, regardless of how much money they have deposited or borrowed.

Choosing Between a Credit Union and a Bank

Selecting between a credit union and a bank depends on your personal financial needs and preferences. If you’re looking for a customer-focused approach, lower fees, and being part of an organization where you have a say in its operations, a credit union might be the right choice for you.

But if you’re seeking a wider range of financial services, more extensive branch and ATM networks, or international banking options, a bank might be more suitable. Therefore, it’s important to consider the aspects that are most important to you—such as customer service, fees, or accessibility—when making this decision.

The End Note

Credit unions have a more member-focused approach with potentially lower fees and a community-centric philosophy. Whereas banks provide broader services and greater accessibility on a national or international scale. Selecting the best among the two depends on your financial needs and preferences.

For credit unions looking to enhance their operational efficiency and member services, Intellect Canada’s eMACH.ai Cloud  credit union focussed offerings can be a game changer. It helps credit unions rapidly launch innovative products that drive revenue, create operational efficiencies and provide an opportunity to attract new, younger members.


1. https://portfolioplus.com/what-is-a-credit union/#:/

2. https://www.ratehub.ca/blog/banks-vs-credit-unions-in-canada/

3. https://www.nerdwallet.com/ca/banking/banks-vs-credit-unions

4. https://www.compareremit.com/money-transfer-tips/banks-vs-credit-unions-in-canada-a-detailed-comparison/