Banks are owned by shareholders, credit unions are owned by the people who bank there, and online banks are ordinary regulated institutions that skipped the branches. For a saver, that one sentence explains most of what a rate board shows: who an institution answers to, and what it spends money on, shape what it can afford to pay you.
None of the three is the “right” kind of institution. But the differences are structural rather than cosmetic, and they explain a pattern you notice quickly once you start comparing: the biggest brands are rarely near the top.
Three ownership models in plain words
A bank is a company. It is federally chartered and supervised by the federal banking regulator, and its profits belong to its shareholders. Every dollar of interest paid to you is a dollar that does not reach them — remember that when you wonder why the posted savings rate at a household name looks the way it does.
A credit union is a co-operative. Everyone who banks there is a member, every member holds a share, and each member gets one vote at the annual meeting regardless of balance. Most credit unions are regulated by their province and insured by a provincial deposit insurer; a small number have taken a federal charter and operate under the same federal regime as banks. Surpluses go back into the institution, or out to members as dividends and better pricing, because there is no outside shareholder waiting for them.
An online bank is a business model, not a legal category. Behind the app sits a chartered bank or trust company, and the brand is often the deposit-gathering arm of a larger lender. It follows the same rules as any other institution of its type; it has simply chosen not to run branches.
| Banks | Credit unions | Online-only banks | |
|---|---|---|---|
| Owned by | Shareholders | Members (each holds a share) | Shareholders (often via a parent institution) |
| Regulated by | Federal regulator | Provincial regulators (a few federal) | Follows the chartered entity behind the brand |
| Deposit protection | CDIC | Provincial insurers (varies by province) | CDIC or a provincial insurer (follows the entity) |
| How you join | Open an account | Buy a membership share, then open an account | Open an account online |
| Branches | Yes | Yes (usually regional) | No |
Why the smaller names often pay more
A deposit is not a favour the institution does you. It is funding: the dollars sitting in savings accounts and GICs are what get lent back out as mortgages and business loans, and every institution has to get those dollars from somewhere.
The largest banks barely have to try. Paycheques land in their chequing accounts, balances sit through decades of habit, and funding arrives whether or not the savings rate impresses anyone. When money shows up on its own, there is no reason to bid for it.
A smaller institution has no such gravity. It needs deposits to fund its lending, and its alternatives, such as borrowing in wholesale markets, cost real money. Offering savers a better rate is frequently its cheapest way to raise funds, so it does. This is economics, not charity — which is exactly why you can rely on it. The incentive does not depend on anyone’s goodwill.
Online-only institutions push the same logic further. With no branch leases and no branch staffing, the cost of taking your deposit is lower, and many of these brands exist precisely to gather deposits for a parent lender’s loan book. Less overhead plus genuine appetite for funding leaves more room in the rate.
The gap is worth real money. Suppose a one-point difference on $20,000 in savings: that is $200 a year, every year the gap persists, for filling in a different application form. (Round numbers, chosen for the arithmetic; the boards carry the live ones.) Our rankings treat every institution the same way, ranked on posted rate as the methodology spells out, and the ordering that results is the market talking.
Joining a credit union: shares, votes and residency
The step that stops many people is smaller than it sounds. To open an account at a credit union you first become a member, and becoming a member means buying a membership share, typically a token amount — $1 at some of the largest credit unions, $5 at many, and up to about $15 at others, usually returned to you if you ever close your membership. It is not a fee. It makes you a part-owner with a vote.
Residency is the other mechanic. Most provincially regulated credit unions require members to live or work in their home province. Federally chartered credit unions, and some online divisions, can accept members from anywhere in Canada. Before counting on any credit union rate from another province, check the institution’s membership page. In practice the share purchase happens inside the account-opening flow and takes a few minutes; you notice it mostly as one extra line on the confirmation screen.
Deposit protection, plainly
Deposits at banks are protected by the Canada Deposit Insurance Corporation, which covers eligible deposits up to $100,000 per depositor, per insured category, at each member institution. Deposits at provincially regulated credit unions are protected by that province’s deposit insurer instead (FSRA in Ontario, for example). Limits differ by province, and in several provinces coverage has no dollar cap. Neither system is a lesser version of the other. They are different systems, each backed in its own way.
For online brands, protection follows the legal entity that holds your deposit rather than the logo on the app. Where two brands belong to one member institution, they can share a single set of coverage limits, so it pays to know which entity you are dealing with. Our deposit insurance guide sets out who insures what, with the coverage details in one place.
Let the board settle it
Ownership explains the pattern; it does not tell you the current order. Institutions move up and down constantly, and the only way to know who is paying most right now is to look. Promo offers are their own reading exercise, covered in our guide to decoding Promo rates. The savings board and the GIC boards rank every institution we track by posted rate, whoever they are. If the winning offer is a GIC, our guide to buying a GIC walks through the purchase step by step. If you would rather not keep checking, set a rate alert and we will do the watching.
Frequently asked questions
Are credit unions as safe as banks?
Credit union deposits are protected by provincial deposit insurers rather than by CDIC, and in several provinces that coverage has no dollar limit. The protection is different rather than weaker. The deposit insurance guide linked above covers the details province by province.
Is an online bank a real bank?
Yes. Behind the brand is a chartered bank, trust company or credit union following the same rules as its branch-based peers. The thing to confirm is which legal entity holds your deposit, because that determines who insures it and up to what limit.
Do I have to move my chequing account to get a better savings rate?
No. Chequing and savings don’t have to live at the same institution, and nothing stops you from keeping daily banking where it is while your savings sit wherever pays most. Transfers between linked accounts typically take a business day or two.