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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.
The products shown below use an illustrative example assuming an initial deposit of $5,000, and monthly deposits of $1,000 over 12 months.
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.
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.
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.
If you’ve decided to join a credit union to take care of your financial needs, consider the following factors when making your choice:
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.
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% | 1.60% Ongoing, conditions apply |
SCU iNetSaver Account | 0.75% | 1.35% |
Community First Bonus Saver Account | 0.10% | 1.60% Ongoing, conditions apply |
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In the case of any banks mentioned below, they still operate under the mutual model which means they are still owned by members.
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:
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.
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.
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.
Check the options in savings accounts for monthly fees.
You will find that some provide you with internet banking and even an app to give you unlimited access to your 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.
For full flexibility, look at accounts that have no requirements for how much money you keep in your savings account.
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:
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.
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.
A legitimate credit union will be regulated by the government, and participate in the Australian Government Guarantee Scheme.
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.
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.