Did you know 4.6 million Australians currently bank with a credit union or building society?
Credit unions, mutual banks and building societies are Authorised Deposit taking Institutions (ADIs) and comply with extensive Australian government regulations that are exactly the same as it is for publicly listed banks. Unlike banks, however, credit unions are customer-owned. This means they focus on customer service rather than paying dividends to shareholders.
Comparing credit union home loans
Bank loans vs Australian credit union home loans
A lot of people do not understand the difference between credit unions and banks. There are two major distinctions that can be made between the two.
The interest rates are usually significantly lower for credit union home loans than they are for the banks. You can also expect to pay fewer fees, and the fees that you do have to pay are often much lower than what you would pay on a bank loan. Credit unions are able to pass on these benefits because they are owned by their customers. Bank profits are distributed among shareholders in the form of dividends. This means that credit union home loans tend to be much cheaper than bank loans when everything is taken into consideration. This was supported by a 2008 study by ASIC, which found that mutuals on average charge the lowest overall loan fees in the market.
Credit unions are owned by their members
Anyone who is a member of a credit union and has an account is a part owner. When you deposit money into your account at a credit union, the deposit is referred to as a share. This is due to the fact that the money deposited represents an ownership in the union. It's much like owning a share of the stock in a company.
What are credit unions?
Ashley Jennings, CEO of SCU, talks credit unions.
Click here for video transcript:
Good morning. My name is Ashley Jennings, and I'm from SCU. A credit union is a financial institution which is wholly owned by its customers. Being wholly owned by our customers means that our focus is on giving them, as I said, the best experience. So yes, we have to make profits similar to what a bank does, but once we pay our overheads and operating expenses, it's about turning those profits into the better services and better products.
To describe the banking experience that we afford our customers, we survey our members quite regularly, and we have an outstanding satisfaction rate of between 80% to 90%, which is unheard of in the banking industry. If you translate that to an experience, it means that what we're giving our customers is something that the banks can't afford or can't give them. That is, we take ownership of their problems, we take ownership of what they want. So when a person approaches us about a home loan or a product, we're giving them something that meets their needs, and we follow that with service. That's the experience we give them, which is different to what a bank can give them.
The beauty of a credit union is it's nimble and flexible. So it's not a monolith, like a bank where it has to move very slowly and to satisfy shareholders and all those sort of things. We are quite nimble, and we're up to date. So when things change in the market, we change with them very quickly.
In most cases you will have access to the same type of services that you would have at a bank. A credit union has the right to offer the services and products that it wants, so there is no guarantee that every service will be available at the credit union you choose. If you are looking for a select product or service you should find out if it is available before becoming a member.
Banks can offer promotional products to lure in more customers based on volume. Banks serve a lot more customers than credit unions and can offer certain deals that a credit union may not be able to afford. Credit unions will usually offer only the services and products that a majority of the membership will want to use.
Credit union customers get personalised service. Staff at credit unions have the flexibility to accommodate some of the borrowers the big banks can’t.
Credit union safety
You can rest assured that any money deposited or any loans taken out with a credit union are as safe as they would be if you dealt with a bank. The government guarantee on deposits applies to all ADIs in Australia, not just the big banks.
Becoming a credit union member
Some credit unions are still based in their historical roots in terms of membership restrictions, although as a general trend these restrictions are loosening. Remember to read the reviews on finder.com.au to see if you are eligible.
There are many ways how you can get in touch with different credit unions. For example:
- You could check with a union through one of its branches.
- Online banking services. This can help you to monitor your accounts with a union at any time of the day.
- Phone services are available from many credit unions. However, the localised approach may mean that support is restricted to business hours. Unassisted phone banking is available 24/7.
- You may get access through ATMs of all sorts. Most are affiliated with the rediATM network which is the largest network in Australia.
- Some unions can handle bank payment services through Australia Post’s Bank@Post service. This could help you to get different bank payments handled through any Australia Post outlet.
Applying is easy
Applying is easy. You can apply online or visit your local credit union office for assistance. Details on the home that you are interested in and how long you want to pay off the loan for will be needed. You should also ensure that you can provide enough proof of your income to show that you can pay off whatever loan you are going to be getting.
Australian credit unions
There are more than 130 customer owned banks in Australia (industry speak for credit unions, mutual banks and building societies). Of those, 76 are credit unions. There are plenty to choose for. Many of the credit unions who are available to general customers nationally will advertise online on websites like finder.com.au
Getting in touch with one of the many different credit unions in Australia could be a great is one of the best things you could do when it comes to managing your money. Contact one today and see what they can do to help you manage your finances.