What Is a Credit Union?
Although the big four banks dominate our banking industry, there is a large and diverse range of credit unions looking after the needs of many Australians.
Credit unions, along with building societies and friendly societies, provide a selection of banking and financial services to over five million customers in Australia.
Credit unions typically pride themselves on their high levels of customer service and competitively priced products, which come about through their focus on customers rather than profits.
Unlike banks which are publicly listed companies on the stock exchange, credit unions are owned by their members, who are ultimately the customers of the credit union.
As publicly listed companies, banks are under great pressure from their shareholders to continually provide increased profits. Often these increased profits come through raising fees and charges, or cutting costs and services.
Credit unions on the other hand are not owned by shareholders, and do not have the same pressure to grow their profits each year. All profits produced by credit unions go towards improved products and services for their customers, as well as lower fees and charges.
Although credit unions are not focused on generating profits, they still need to ensure that they are profitable so that they can continue to look after their customers and improve their products and services.
Independent research obtained by Abacus, an organisation which represents the credit unions and building societies, revealed that credit union customers paid on average 0.50% less on their borrowings compared with the big banks.
Many credit unions also offer business banking services, including commercial loans, overdrafts, equipment leasing and even business insurance in some cases.
As with the rest of the banks, credit unions are subject to strict regulations which govern the operations of Australian banks and financial institutions.
Savings held by credit unions are eligible for the same government guarantees which apply to savings held with the banks.
Although credit unions offer a large range of products and services comparable to many of the banks, there are a few limitations that potential customers will have to consider.
Credit unions have vastly smaller branch networks than the big banks, and in many cases they are concentrated in and around regional areas. Their ATM networks are also smaller than the banks, however they often have arrangements with other institutions for free ATM transactions.
For the average Australian, a credit union will be able to provide all of the services they’re ever likely to need, however this might not be the case if you have high level banking needs.
Credit unions are much smaller than the big banks, and for this reason they typically have lower limits in place for personal and business lending. This won’t be an issue for the majority of Australian families and small businesses however.
Switching to a Credit Union
Making the switch to a credit union could be a great option, provided that they are still able to assist you with all of your banking needs now and into the foreseeable future.
With so many credit unions to choose from, and with each having a different range of products and services available, it is important to do your homework before choosing a credit union.
If you choose correctly, making the switch to a credit union can certainly be a good option for many Australians.