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Do credit union savings accounts have higher interest rates?
Credit unions offer a range of financial products and competitive interest rates on their savings accounts.
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Credit unions are known for offering higher interest rates on their products. Historically, credit unions were set up to help workers access banking services and products without incurring high interest rates and fees typically associated with banks.
Compare savings accounts provided by credit unions below
The products shown below use an illustrative example assuming an initial deposit of $5,000, and monthly deposits of $1,000 over 12 months.
Updated October 18th, 2019
Instead of customers, credit unions are made up of members who are also part-owners of the credit union. As such, members can take part in some decision making processes such as voting for the board of directors. Credit unions, publicly-listed banks and mutual banks are all Authorised Deposit-Taking Institutions (ADIs) which means they are regulated by the Australian Prudential Regulation Authority (APRA). This ensures customers and members are protected by the Banking Act 1959 and savings up to $250,000 per person is guaranteed by the Government.
What is a credit union and how does it work?
Originally, credit unions were created by various industries as a means of allowing their workers access to banking products without having to pay high rates and fees. For this reason, many credit unions today still only cater to certain groups, such as industrial unions and building societies. However, through mergers some have been able to expand their membership to include more Australians.
Compare bank accounts offered by credit unions
As a member of a credit union, you will find that the savings accounts they offer work in the same way as what you find in a bank. There are a number of options available, including high interest savings accounts and term deposits. With some credit unions, you will even get the benefit of bonus interest and no fees. Because of the similarities between banks and credit unions, it is important that you investigate and compare various credit unions and features of the savings accounts available before you choose an account to invest your savings in.
Defining credit unions and mutual banks
In recent years, some credit unions have rebranded or have begun trading as banks. However, in the case of Heritage Bank (formerly known as Heritage Building Society) and Beyond Bank (formerly known as Community CPS Australia), they continue to be structured under a mutual model which means they are still owned by members rather than shareholders.
The difference between credit unions and mutual banks may vary between organisations but their business models remain the same. Most mutual banks are former building societies or credit unions who have applied to achieve bank status through APRA. The key similarity between the two is that they are both customer-owned associations.
Useful questions to ask when choosing a credit union
If you’ve decided to join a credit union to take care of your financial needs, consider the following factors when making your choice:
- Does the credit union have a branch close to you?
- Does it offer the accounts, credit cards and services you require?
- Does it charge many fees on its products?
- Does it have a good reputation and how long has it been established?
- Is its online banking portal easy to use?
- Can it offer prompt and friendly customer support whenever you need help?
What are the advantages of banking with a credit union over a bank?
Because it is customer owned, you will find that the rates and fees of a credit union are lower than what a bank offers. Minimum deposit requirements are often also lower, allowing for a greater number of people to qualify for savings plans such as a term deposit.
finder.com.au featured credit union savings accounts
| Product name | Standard variable rate (p.a) | Maximum interest rate (p.a) |
|---|---|---|
| CUA eSaver Reward Account | 0.05% | 2.00% Ongoing, conditions apply |
| People's Choice Bonus Saver Account | 0.01% | 1.95% Ongoing, conditions apply |
| SCU iNetSaver Account | 1.00% | 1.60% |
| Community First Bonus Saver Account | 0.10% | 1.80% Ongoing, conditions apply |
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Who are the biggest credit unions in Australia?
In the case of any banks mentioned below, they still operate under the mutual model which means they are still owned by members.
Some of the largest customer owned banking associations
- CUA
- Heritage Bank
- Newcastle Permanent
- People's Choice Credit Union
- IMB Bank
- Beyond Bank Australia
- Teachers Mutual Bank Limited
- P&N Bank
- Bank Australia
How do I compare credit union savings and bank accounts?
Before you can begin comparing savings accounts offered by credit unions, you need to know which credit unions are available for you to become a member of. Once you narrow down your choices you can begin to compare the standard features of savings accounts:
Look for: Credit union eligibility
If you are already a part of a union, first check to see if they also have a credit union. You might also find some that serve the specific region of Australia where you live.
Look for: Membership fee
Credit unions will require a nominal fee to ‘buy’ your membership. This is typically no more than $1 or $2 and will be deducted from your initial banking account.
Look for: Interest rates
Once you have narrowed down your choices, check the interest rates being offered for savings accounts and ensure that they are competitive to what you would find with a bank.
Look for: Fees
Check the options in savings accounts for monthly fees.
Look for: Accessibility
You will find that some provide you with internet banking and even an app to give you unlimited access to your account.
Look for: Option for a linked account
With savings accounts it is customary that you link it to a transaction account so that you can easily transfer funds from one to the other. If you don’t want to also have your everyday account with the credit union, you will have to check to see if your current bank and the credit union allow you to link accounts with other institutions.
Look for: Minimum balance requirements
For full flexibility, look at accounts that have no requirements for how much money you keep in your savings account.
What are the benefits of joining a credit union?
- Multiple options. Most credit unions are able to offer their members a range of savings accounts option to suit various needs.
- Lower fees. As a credit union is not a profit earning institution, you could find that any fees for services and accounts are lower.
- Competitive rates. The interest rates for savings accounts with a credit union are competitive in comparison to the rest of the market.
What are some of the risks involved with signing up to a credit union?
While a credit union may not have the financial strength of a larger bank, they are still regulated by the Australian government, guaranteeing that your money is safe. Still, there are some things you should avoid when using one of their savings products:
- Limited presence. Due to their smaller size, you might find that the credit union you choose does not have a large presence in Australia.
- You must be a member and pay fees. Unless you pay the fee and become a member, the products available with a credit union will not be offered to you.
- Not meeting terms. When you choose a savings account that offers bonus interest, make sure that you are able to meet any of the stated terms first in order to get the full benefit.
Remember. . .
Being a member of a credit union does not obligate you to bank solely with them. When looking at savings accounts still compare the features to those that are offered by local banks.
FAQs about credit unions
Q. Are there any investment or retail bank start ups in Australia?
Strict regulations in Australia have made it more difficult for new investment or retail banks to open, unlike in other countries, but new online financial service providers are slowly making their way into the market.
Q. Are credit unions a part of the Australian Government Guarantee Scheme?
A legitimate credit union will be regulated by the government, and participate in the Australian Government Guarantee Scheme.
Q. Are credit unions only available to people who belong to a union through their work?
No, credit unions have become more flexible with their membership criteria. Some will allow for family members and friends of union members to join, while others are open to everyone.
Q. Do credit unions offer home loans and other banking products or just savings accounts?
You will need to check with the ones you are eligible for individually, but most offer the same products that a bank does, including home loans.
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