Credit unions Saving with a credit union
What is a credit union?
Credit unions let people in a local community or other organisation save and borrow money. There are nearly 450 credit unions in Britain, so almost everyone has access to one. There are also work-related credit unions, for example for employees of the NHS, trade union members and employees in the passenger transport industry.
Until 8 January 2012, credit unions were hampered by restrictions which meant all of their members had to have a common bond – such as living in the same geographical area or working for the same employer.
Credit unions no longer need to prove that all the eligible members have something in common, which means that credit union services can be extended to new groups much more easily.
For instance, a credit union providing services to anyone living or working in Pontefract will now be able to serve all the employees of a company too, even if they do not live or work in Pontefract.
How are credit unions run?
Credit unions are owned and controlled by their members, so they have no outside shareholders to pay. They are run by volunteers elected by the membership. Any profit that a credit union makes is used to develop the credit union and provide a return to savers.
In June 2012, the government announced plans to invest £38m over the course of three years to make credit union services available to one million more people. Currently just 2% of people in the UK are members of a credit union, compared to up to 75% in Ireland.
Are my savings safe with a credit union?
Credit unions are licensed deposit takers, authorised and regulated by the Financial Conduct Authority. Just like ordinary savings accounts, they are fully covered by the Financial Services Compensation Scheme (FSCS) up to the standard limit of £85,000 per individual.
For more information, see our guide to protecting your savings through the FSCS.
Earn interest on your savings
Previously, credit unions could not pay interest on savings, only a retrospective dividend. Credit unions can now pay interest on savings, which means it will be easier for people to compare the rates of return with other savings providers and will help credit unions attract more savers.
Contact your local credit union to find out what interest rates they are offering.
Organisations can join a credit union
Under the old rules, only individuals were able to become members of credit unions. The new rules mean that organisations themselves can join a credit union (up to a maximum of 10% of the members) and use the financial services it provides.
A community group, housing association or local employer, for example, may now be able to use a credit union to manage its money, with the added advantage that the money is kept in the community.
How can I find my local credit union?
To open a savings account with a credit union, you need to contact the credit union directly and fill out the relevant forms. To find your local credit union visit www.findyourcreditunion.co.uk or call the Association of British Credit Unions (Abcul) on 0161 832 3694.