What is a credit union?
Credit unions are non-profit financial organisations, traditionally set up by members with some kind of community in common - be it where they live or their profession. But this is changing.
There are more than 500 credit unions in Britain, so almost everyone has access to one.
Until 8 January 2012, credit unions were hampered by restrictions that 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 don't 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.
Are you eligible to use a credit union?
You'll need to check whether there's a credit union in your area, or if there's one for people from your profession - an easy way to do this is by searching the site Find Your Credit Union - set up by The Association of British Credit Unions Limited (Abcul).
You can also call Abcul on 0161 832 3694.
As mentioned above, some credit unions will have relaxed their eligibility criteria - but you'll need to check first.
Are my savings safe with a credit union?
Yes - your savings are as safe as they would be with a bank or building society.
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.
Do I earn interest on credit union savings account?
Previously, credit unions could not pay interest on savings, only a retrospective dividend.
But, 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 - although most still pay a dividend.
Contact your local credit union to find out more information about what level of dividend it has paid in recent years, or whether it offers interest on savings.
Alternatively, if you want to compare rates on traditional savings accounts, the Which? Money Compare tables let you search hundreds of savings accounts and cash Isa deals from providers large and small so that you can find a good home for your nest egg.
Can 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.
Saving with a credit union: FAQ
We give answers to some of the most common questions about saving with a credit union.
What happens to credit union savings when you die?
An added benefit of saving with a credit union, is that a form of life insurance is often included for free. So, if you die, your savings could be increased by this insurance - even doubled - and paid to whoever you choose.
The service varies between credit unions, so check the policy before you sign up.
Are credit union savings taxable?
Yes. Whether a credit union pays you in savings interest, or through dividends, both kinds of income are taxable - and both are treated as savings interest.
This means that what you earn goes towards your personal savings allowance - the amount you get depends on your income.
So, even if you're paid in dividends, what you earn through a credit union won't go towards your dividend allowance.
Find out more: personal savings allowance and tax on savings interest
How do I make withdrawals from a credit union?
This depends on the organisation, so you'll have to check first.
You can make withdrawals from some credit unions by visiting the local credit union office or cashing a cheque at the post office.
Some larger organisations make it even easier, allowing you to transfer funds online to a specified account, or withdrawing at high street cash machines.
How do I pay into a credit union savings account?
Again, the accepted payment methods will vary. You can usually pay in at your local credit union office, and sometimes at the post office.
Some bigger credit unions will accept BACS and debit card payments.
If the credit union is linked to your employment, you might be able to save directly through your payroll.
Can I set up my own credit union?
You can - but it will take a while. It often takes up to three years to set up a credit union, and there are strict guidelines on how to do it.
You'll need to decide what the membership criteria for joining will be, and satisfy FSA regulations to prove it will be a sustainable organisation.
If existing credit unions aren't the right fit for you, it may be worth contacting a local organisation to see if it would be willing extending its services to fit you before you decide to set up your own.