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The difference between Credit Unions and Banks

Man on laptop learning about credit unions

Find out the key differences between credit unions and banks and why joining a credit union can help you to support your colleagues.

Young happy smiling female sitting on sofa using laptop to learn about credit unions

Credit unions may offer very similar products as banks, such as savings and personal loans, but there are many differences which make credit unions stand out.

We have outlined some of the key differences between credit unions and banks so you are aware of the positive impact credit unions make.

Credit unions are exclusive

The first key difference is that anyone can open a bank account, but not everyone can join a credit union.

Each credit union has their own ‘field of membership’, or ‘common bond’. Only members within a credit union’s membership field can access its products and services. A credit union’s membership can depend on where people live or their employer.

At Serve and Protect, our field of membership is anyone working in the police, prison and probation, military, fire and rescue, or health and social care sectors in the UK. Once you’re a member, your immediate family living with you can also join and access the same services.

This means that each credit union serves a specific community of people. Saving and borrowing with a credit union helps other people in the community to access these services.

Credit unions are co-operative

Banks are owned and run by their shareholders. A bank operates with the goal of providing a return to their shareholders. On the other hand, credit unions are owned by and run for their members. At the financial year’s end, credit unions aim to offer members a return on savings as an annual dividend.

Members can attend the credit union’s Annual General Meeting to vote and voice their opinions. The board of directors consists of elected members making decisions for the members’ best interest.

Credit unions are not-for-profit

Banks are for-profit, which means their aim is to make money from loans and investments to provide a return to their shareholders. Credit unions however are not-for-profit. Credit unions have no external shareholders to satisfy, so their profits are reinvested back into the credit union and its members

At Serve and Protect, every member has to save a minimum of £10 per month. Our members’ savings create a pot of money which we can use to lend to other members when they need to borrow. The interest paid on these loans generates income, with the profit at the end of the year used to provide a return to our members and improve our services and technology. We also use some of our profit to support causes close to our members’ hearts.

Credit unions are ethical

A credit union’s main purpose is to serve their members by improving their financial position, encouraging healthy saving habits, and providing affordable loans where needed.

Credit unions provide affordable credit, which is capped at 42.6% APR, and act as an ethical alternative to high-interest and illegal lenders such as payday lenders and loan sharks who typically charge over 100% APR.

At Serve and Protect, we see you as more than just your credit score. Our personal loan rates are tiered based on the amount you wish to borrow, between 8% and 13.5% APR. As a regulated financial provider we still undertake credit checks and affordability assessments, but there are no hidden fees, charges, or early-repayment penalties.

Another key focus of credit unions is to provide financial education to their members. We do this through our website and social media channels, as well as providing financial webinars and in-person education.

Join Serve and Protect Credit Union

We provide an easy way to save and an affordable and ethical option to borrow. Become a member today here.

If you are not eligible to join Serve and Protect, you can find a credit union for you here.

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