Are Canadians increasingly turning to credit unions as low-cost alternatives to the big banks? The results of one credit union's national survey on the subject would suggest we are but perhaps that shouldn't come as a shock.
The average Canadian has been with the same bank for more than 15 years, yet more than 40 per cent of those surveyed are unhappy with the service fees their bank charges them, according to the survey conducted by FirstOntario Credit Union.
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Victoria-based personal finance blogger Cait Flanders is a credit union convert. She says she made the switch from a large national bank to a credit union about six years ago and she'll never go back. She's blogged extensively about her experience, documenting how she's managing to crawl out of debt.
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"Not having to pay (monthly) fees is a huge deal. I haven't paid any fees in the six years I've been with (Coast Captial Savings) beyond a one-time $5 membership when I first joined," she remarks. "I've been saving about $200 per year but the reason I'll never go back to a bank is really due to the service I get at my credit union."
Generally, banks tend to have higher fees but they also offer a wider breadth of services with more branches and ATMs for easy access. Credit unions have lower fees, higher interest rates, and more personal service but some smaller credit unions may lack business services or they could have limited hours.
Big banks have a PR problem
Banking fees, and the lack of transparency behind those charges, are just one reason an increased number of consumers are quickly becoming credit union converts. "With what we've seen over the last year particularly with the Occupy Wall Street and Bay Street movements ... what caused the (2008) meltdown was corporate greed. We're not saying this is all banks but it's corporations that get greedy and it was profit above anything else," says Dave Schurman, executive vice-president and COO, FirstOntario Credit Union.
"We found (in the FirstOntario survey) about half the people were either dissatisfied completely or somewhat dissatisfied with their bank and most didn't really know what to do about it, figuring all banks are the same."
Schurman tells Yahoo! Canada a lot of folks in Ontario and the Greater Toronto Area in particular don't know what a credit union is.
"I've lived in B.C. and you see (credit union) VanCity everywhere. In fact, one out of every three British Columbians are members of a credit union," he says by comparison, adding Quebec, Saskatchewan, and P.E.I. have equally impressive numbers. "Toronto is a bank city. It's home to the head offices of all the banks in Canada pretty well. The ivory towers are on Bay Street and there's a lot more competition in Ontario as such since all the big banks are here."
There could be something to that notion. After all the Occupy movement, it could be argued, was born of a growing distrust of the financial system that brought the world to its knees via the 2008 recession.
Stateside, a Gallup poll finds 36 per cent of Americans say they have very little or no confidence in U.S. banks, the highest percentage on record since Gallup first started tracking that data. Moreover, an Edelman Digital survey of American banking attitudes finds community or regional banks and mutual fund firms are considered the most trustworthy.
However, a July 2011 survey commissioned by the Canadian Banking Association suggests a large majority of Canucks have a favourable impression of their banks. That report cites an Ernst & Young survey that "confirmed this assessment, finding that the majority of Canadian bank customers (66 per cent) are very satisfied with the level of personalized attention they receive from their bank."
"We've seen some uptick (at credit unions) since 2008 but I don't think we've seen the same anger towards the banks like we've seen in the U.S.," says Art Chamberlain, media relations manager for Central 1 Credit Union — an umbrella organization that acts as the central financing facility and trade association for credit unions in B.C. and Ontario. "Having said that, there are a considerable percentage of people that are unhappy with the big banks.
"In every customer survey I've ever seen credit unions come out ahead of the banks."
The FirstOntario survey, conducted in November 2011, polled more than 2,500 Canadians on their banking practices, preferences, satisfaction levels and asked whether they would be willing to leave their bank. Of those surveyed, 42 per cent indicated they are either 'unsatisfied completely' or only 'somewhat satisfied' with their current financial institution. Nearly 10 per cent said they are reluctant to switch because it is the only bank they have ever had, or they feel that switching would be too much trouble.
Making the switch
Credit unions provide the same products and services expected from a financial institution but with a commitment to invest back in the communities in which they operate, Schurman says. Moreover, he says switching is a straightforward affair.
"Credit unions differ from banks and other financial institutions in that the members who have accounts in the credit union are owners of the credit union and thus have a voice," he adds. "Our policies are developed by the owners of our financial institution. We're not bound by a policy that's just going to generate profit. Profit is not what drives the credit union, it's products and services to their members."
Central 1's Chamberlain recommends consumers seek out a credit union in their region and do their homework.
"The core of the credit union system is the connection to the local communities and neighbourhoods," he says. "Each credit union is different. That's the essence of credit unions. They're controlled and local boards and members determine their approach to all matters. People need to find one they're comfortable with that fits their own approach to finance."
Also noteworthy, the Financial Consumer Agency of Canada recently published two new tip sheets for consumers designed to provide an easy-to-understand guide on how Canadians can save money on their banking costs: Choosing the Right Chequing Account & Bank Package and Choosing the Right Savings Account.