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Are credit unions different than banks?

Posted by admin on April 24, 2008 in Investment Information

Nancy aka the money coach is a regular contribution on this blog. As a newly minted insider to the credit union world, I am more than happy for her to discuss what exactly a credit union is, how a credit union is regulated, the social responsibility of credit unions and what the difference is between a credit union and a bank and provide some information we don’t know about credit unions. Thanks for the post Nancy!

Thanks, Thicken My Wallet, for the opportunity to guest post! Some readers may recognize me as “nancy, aka money coach”. Citizens Bank of Canada recently created a position for me (yahooo!) as their bank evangelist. Citizens Bank is one of Canada’s best-kept-secrets, and I’m very passionate about it (hence the nerve to pitch myself to the CEO). Here’s why.

Citizens Bank is a federally chartered bank, but owned by a credit union. We’re also a virtual bank, high interest, low/no fees (a home grown alternative to … errr… you know who). This combination makes the bank very unique. To understand why, we first need to understand the difference between a credit union and banks.

Fundamentally…

Banks, of course, are ultimately accountable to their shareholders and have as a chief mandate generating profit for their shareholders. Shareholders vote for the board of directors who then set the direction of the bank.

Credit Unions are cooperatives, and accountable to the members of the cooperative. Members vote for the board of directors, who then set the direction for the credit union, within the principles of the cooperative movement.

What does that mean for Citizens Bank? It means that we’ve been freed up to operate for the triple bottom line: People.Planet.Profits. It’s a little deeper even than behaving like a good corporate citizen. Around here, we say “csr is in our dna”.

Here are some specific examples.

• RRSPs: for every $1000 a member contributed in Jan/Feb this year, we donated $10 to Habitat for Humanity.

• Visas: cardholders can pick from an Amnesty, Oxfam or Shared Interest Visa. In addition to the usual points, we donate 10 cents to the chosen beneficiary, every single swipe.

• Shared Interest: a portion of our profits get pooled. Members nominate non-profits and charities as recipients. We choose 12 of these nominations, and then members vote on them. The profit pool is divided in direct proportion to the votes. (sneek peak of 2007 recipients available next week!)

• Shared World Term: you’ve likely heard the breathtaking story of economics professor and nobel peace prize laureate Muhammad Yunus, who founded the Grameen Bank. The bank provides micro-credit loans (et alia) allowing thousands of people to move out of poverty. We have a term deposit that does the same – every dime is lent out as very favourable rates to individuals in impoverished conditions around the world.

We have a clearly articulated ethical policy.

And oh yeah… we’re carbon neutral as of Dec 2007, 2 years ahead of plan. (deets on how we did it, here.)

If you haven’t guessed, we’re a bank with ideals. We’re full of staff with imagination, some of whom are blueblood bankers, some of us (*cough* that would be me *cough*) quirky, and all of us committed to doing banking differently in a way that contributes to a better world.