Should Investors Buy GICs from Credit Unions?
Credit unions usually offer superior GIC rates when compared to traditional banks, while also providing unique benefits like profit sharing and enhanced deposit insurance. Unlike banks, which are for-profit corporations accountable to shareholders, credit unions operate as not-for-profit, member-owned cooperatives. Instead of paying dividends to external investors, they return earnings to members through higher interest rates, lower fees, and improved services.
Benefits of Using a Credit Union
Higher Interest Rates
The cooperative structure allows credit unions to offer highly competitive GIC rates. For example, as of December 28, 2025, Saven Financial offers a 5-year non-redeemable GIC at 3.80%, significantly outpacing typical big bank rates such as RBC which only offers 3.00%.
Profit Sharing
Some credit unions offer profit-sharing programs that return a portion of annual earnings directly to members.
Servus Credit Union’s Profit Share® program has returned over $943 million to members since 2009—including $83 million in 2025 alone. Members earn cash back on GICs, savings accounts, mortgages, and loans based on their average balances throughout the year.
Superior Deposit Insurance
Deposit insurance coverage at credit unions often exceeds federal limits. Several provinces provide unlimited coverage—Alberta, British Columbia, Manitoba, and Saskatchewan all guarantee 100% of deposits with no limit. Ontario provides $250,000 for non-registered accounts and unlimited coverage for registered plans. In comparison, the Canada Deposit Insurance Corporation (CDIC) typically limits coverage to $100,000 per category at banks.
Note: A select number of institutions, known as federal credit unions (e.g., Coast Capital Savings ), are federally regulated and covered by CDIC. Always verify the specific insurance coverage for any institution before investing.
For a comprehensive breakdown, consult the RDBA Deposit Insurance Chart .
Beyond rates and insurance, members often benefit from voting rights and personalized service from institutions committed to reinvesting in their local communities.
Trade-offs to Consider
The “New Money” Trap and Transfer Fees
Financial institutions often offer high promotional rates exclusively for “new money”—funds not currently held with them. While attractive, these short-term offers require careful consideration, especially for registered accounts (like TFSAs or RRSPs).
Moving registered funds for a promotional rate can result in significant transfer-out fees (often $100–$150) when moving the funds again at maturity. These fees can consume the additional interest earned, effectively “trapping” funds at the institution. Always check transfer-out fees before moving registered accounts for a short-term rate increase.
Other Limitations
Investors should also be aware of practical limitations:
- Membership Restrictions: Most credit unions are provincially regulated, restricting membership to residents of that specific province.
- Limited Services: Banking features may be more basic. Not all institutions offer chequing accounts, mobile cheque deposit, or robust online platforms. Moving money can sometimes be slower, requiring transfers to linked external accounts.
- Foreign Currency: Foreign currency GICs (e.g., USD) are less common. Provincial deposit insurers in Ontario, Nova Scotia, Newfoundland, PEI, and Quebec generally do not cover foreign currency deposits. If you require USD GICs, a CDIC-insured bank is often the better choice.
- Product Variety: Specialized options, such as market-linked GICs or escalator GICs , are often unavailable.
Quick Comparison
| Feature | Traditional Bank | Credit Union |
|---|---|---|
| Structure | For-profit (shareholders) | Not-for-profit (member-owned) |
| Interest Rates | Generally lower | Often higher |
| Deposit Insurance | CDIC ($100K/category) | Provincial (varies; often better) |
| Foreign Currency GICs | Yes (CDIC insured) | Varies by province |
| Membership | Open to all | May require specific provincial residency |
| Accessibility | Extensive branch network | Fewer branches; often online |
Credit unions present a compelling alternative to traditional banks for investors prioritizing higher yields and enhanced safety. While they offer distinct advantages, they also come with limitations regarding accessibility, product variety, and membership eligibility. Thorough due diligence is key: verify residency requirements, confirm applicable deposit insurance limits, and ensure the institution provides the necessary services before committing your funds.