For years, I resisted the idea of switching to a Credit Union. I didn’t see the point. I vaguely knew that it was better to support local Credit Unions (instead of big, for-profit banks) but at that stage in my life, I was a student, and most banks have free student accounts.
Until one day a bad bank experience promoted me to look into Credit Unions and I began saving hundreds of dollars passively! But switching did come with Pros and Cons….
…However, in the end it was worth it.
One of the reason I did not switch to a Credit Union was because I really didn’t have all that much money so it seemed like a hassle. Essentially, all of my money went into paying my tuition so that I could graduate debt free. At 15, after my first job, I just opened a bank account and stayed with them, cause at like 15, what did I really know about different financial institutions?
How I Chose My Initial Bank
One of the reason I did not switch to a Credit Union was I think this is a pretty common route, but I just signed up with the bank my parents banked with. They were working with multiple banks so I chose the one with the best opening hours as I was usually at work or school during the day.
At first it was great. I had unlimited bank transactions, my bank was open until 8PM most days and even open on Sunday! I had a great relationship with my bank tellers and there was a bank right near my work places so it was always easily accessible.
However, after I graduated, I got to learn the ever-so fun activity of having all of my student perks revoked, including my bank account. My chequing account switched over to a paid account (unless I kept a very high minimum balance) and my savings account suddenly had restrictions (i.e. there would be a fee if I had more than 2 transactions per month on the account).
In the beginning, I didn’t switch because:
1) I was lazy. It seemed like too much hassle and all the big banks had similar plans.
2) I thought paying $10/month to have access to my chequing account wasn’t that big of a deal.
Until I realized “OMG $10/MONTH IS SUCH A BIG DEAL.” Looking back on it now, the whole concept is ridiculous. I was paying the bank money, to keep my money.
Long story short, after a phone call with a not-very-nice customer service agent about fraudulent charges on my bank credit card, I decided I was going to find a new bank. And switch all my direct deposits,
First of all, let’s look at the differences between a Credit Union and a Big Bank. Because do you know? I really didn’t.
By definition (and according to Public Service Credit Union):
Credit unions are not-for-profit financial cooperatives, whose earnings are paid back to members in the form of higher savings rates and lower loan rates
Banks are for-profit corporations, with declared earnings paid to stockholders only.
But there is so much more to it.
I’ve been banking with Tangerine since late 2016 and up until then, exclusively used TD Bank. I know every bank/credit union is different but I want this post to be as specific as possible.
Here’s A Summary:
|Interest||Limited Customer Service|
|Convenience||Inconvenient Email Transfers|
|Waived Fees||Limited Financial Options (ie. Mortgage)|
Pros Of A Credit Union
• The Savings: The monthly savings I’ve accumulated by not paying that $10/month – $315.73.
• The Interest: When I first started banking with Tangerine, they had a number of high interest savings account promotion. Full disclosure: I don’t get them as often anymore. I don’t know if it’s because I’m not a new client anymore (so they don’t need to promote to me as often) but I still get them from time to time. However, my total interest with Tangerine to date is $501.12.
• Digital Convenience: Everything is online. This can also be a con, but I love how everything is super user-friendly online. The whole interface is designed to be as user friendly as possible and I enjoy being able to log into my bank account incredibly frequently to check up on my expenses.
• Physical Convenience: You would think that because you are with a credit union, maybe you would have fewer options for ATMs, wrong. I actually had more. With Tangerine, because it is owned by a larger bank corporation, you are also able to use their bank ATMS at no cost as well. Other credit unions that I looked into, allowed for use of ATMs from partnering credit unions. So although it seemed more limiting, it actually provided more options.
• Waived Fees:
- Domestic Fees: To use my debit card with my bank, I was charged $1.25 per transation. While I mostly put everything on my credit card (and on average only used it 1-2 a month, it was still fees I did not need to pay. I saved approximately $28.75
- International Fees: I didn’t know this, but because Tangerine is owned by Scotia Bank, it not only waived its fees, it completely waives its fees or reduces the fees when taking out money from an international ATM. If it is one of Scotia’s fees, it’s completely waived, which was really lucky for me because while I was living in Tanzania, I was really close to a partner bank and drew out money completely for free. 14 Waived Transactions (usually $5/transaction) and 16 reduced Transactions (saved $3/transaction), I saved about $118.
Total Savings: $963.60 + LOTS OF TIME
In the end, I saved almost $1000 from doing essentially nothing different.
Cons of A Credit Union
• Bank Drafts: Tangerine takes up to 7 business days to have a bank draft processed. And while this may not seem like a big deal, when I was purchasing my apartment, I needed to have a bank draft available within 24 hours. Thankfully, my mom had liquid funds and she was able to have a bank draft made on my behalf, and I transferred her the money a few days later.
• Limited Customer Service Support: Now Tangerine does everything over the phone and online, and, as a pretty tech savvy individual, it works for me. But I understand some people need a physical branch and person to speak with. Remember: That has a price.
• Email Transfers: With my bank, I am able to transfer money via Interac for free. With my credit union, I can email money for free, but it forces the receiver to enter in a lot more information instead of accepting via Interac. It’s not an inconvenience necessarily for me, but it is for anyone I’m sending money too.
• Limited Financial Options: I’ll touch on this later on why I still keep a bank but my Credit Union has limited options in things like mortgages, investing, etc.
While it’s not perfect, I highly recommend Tangerine. If you would like to sign up, please feel free to use my code 44592405S1 (or not – I’m so not offended!) and get $25 FOR FREE (Full Disclosure: I also get $25 so it’s a win-win). This is not a sponsored post, I literally recommend them to all my bestfriends and sister.
Why I still keep a bank account
With all of the savings, you’d think that there would be no reason to bank elsewhere. Wrong. Like most things in life, it’s best to have diversity and not put all your eggs in one basket. I still like having my bank for the following cases:
1) In case my Credit Union Bank Card gets compromised.
2) They do still have many branches and have great opening hours. In case I do need to cash withdrawal in a pinch, the more choices, the better.
3) My credit score. I’d spent almost 10 years with my bank building up an amazing credit history. I never missed a payment and have always been in good terms with my bank. Having easy access to pre-approved lines of credit including my mortgage is definitely something money can’t buy.
4) To have larger financial options: While there are some credit unions that are starting to offer large financial options like mortgages and investments, my credit union did not have those options when I started. So a bank was still a great option (plus I already had great credit history) when I needed a mortgage and when I wanted to start investing in the stock market (going horribly by the way – I do not recommend individual stock picking).
5) An extra Savings Account. Most personal finance advice recommends having money with a separate institution so that it’s easier to save. If you simply don’t see the money, it’s easy not to be tempted into spending it. I still have a Savings Account through my bank and like I mentioned before, I have to pay a fee if I have more than 2 transactions a month so it stops me from withdrawing the money.
I know this was a very personal analysis on my options and needs but my goal for this blog is to actually give specific information, instead of the generic advice that is abundant on the internet. And while this comparison is specific to me, many financial instructions have similar structures, and I encourage you to do your own research in for financial instructions in your country/area! Here are some resources to help you compare banking institutions to see what’s best for you.
- Credit Unions As Online Banking Options – More detailed article by Young and Thrifty
Canadian Chequing and Savings Account Comparison Tool
American Chequing and Savings Account Comparison Tools