Only around 2% of the UK population are members of a credit union. But with over 393 million members in over 118 different countries, they are one of the best kept secrets in financial services. Discover how credit unions can help you to grow your finances below.
How are credit unions different to banks?
Credit unions are not-for-profit financial cooperatives. Their aim is to provide products and services to best support their members’ financial needs, not to make a profit for themself. They do not have external shareholders. By saving into an account you become a member and your savings are treated as shares. This means that as a member you are essentially an owner.
As a result, you are entitled to attend their Annual General Meeting (AGM). Here, you can have your say on how you think the credit union should operate. You can also be elected to become a member of the Board of Directors, who decide the overall strategy and ensure they are serving their members correctly.
To join a credit union you must fit it’s field of membership, or common bond. This could be living or working in a defined location, or working for a specific employer. Because of this, each credit union serves a specific community of people. Their services are tailored to meet the needs of this community and money which goes into the credit union stays within the community.
What services do they offer?
Credit unions offer a range of financial products and services designed to help their members to manage and improve their finances. Typically, these products come in the form of savings accounts and personal loans. Different credit unions will offer slightly different products and services. Some will have physical branches where members can speak to a member of staff, while others will operate completely online.
Many of their products are aimed at improving their members’ financial situation. This is primarily achieved by encouraging members to start saving. Credit unions often partner with employers to provide something called ‘salary deduction’. This makes saving simple and convenient with monthly deductions direct from pay. Many will also offer specific lending products aimed at building their members’ credit.
Unlike banks, credit unions usually pay their members a dividend at the end of their financial year. They may also offer savings products which offer a guaranteed rate of interest. This helps their members plan for their financial future and make the most of their savings.
Credit unions act as an ethical and affordable alternative to high-interest and illegal lending. The maximum rate they can offer is 42.6% APR, compared to rates of around 1,250% for payday lenders. For many people, credit unions actually offer better rates than what they may be offered from a high-street lender.
Why should I become a member?
Joining a credit union is a great way to get into the habit of saving, with access to an ethical and affordable option to borrow when you need to. It is also a great way of financially supporting your community or your colleagues.
By saving with a credit union, you are providing funds which can be used to lend to other members when they need financial support. This could be to consolidate their existing debt and save money on their repayments, get out of a financial emergency, or even to renovate their home.
So whether you join a credit union to benefit from salary deduction, earn competitive savings returns, or to borrow affordably and responsibly, everyone feels the benefit. This aspect of ‘people helping people’ is what sets them apart from other financial providers.
For more information on how they differ to banks, click here.
Become a member today!
If you work for the police, prison and probation, military, fire or health services in the UK, you are eligible to join Serve and Protect and start saving direct from your pay. Find out more about joining Serve and Protect here.
If you are not eligible to join Serve and Protect, you can find your local credit union here.
- The information provided is for guidance and educational purposes only. Serve and Protect CU does not offer regulated financial advice. Please seek independent financial advice.
