Conventional current accounts are run by big banks and building societies (better, but they are still mostly run only for profit). A credit union is a local bank owned and run by local people (it’s quite lengthy and complicated to set one up, so try to find one to join, most areas have one). The larger ones have their own offices, and smaller ones tend to be run in local shops and schools (junior accounts are often available, to encourage children to save).
To join, you have to have a ‘common bond’. This is usually the area you live in, but can also be a religion or profession (the NHS, fire fighters, prison service and police have their own credit unions).
It’s really simple to set up – usually you just arrive with two forms of ID and £1, and you’re good to go. Most allow homeless people to join, by listing their hostel. Rather than interest, credit union members get dividends, based on how much they have saved. So the more you save, the bigger dividend you get (with today’s low interest rates, dividends are often more).
Of course, the main benefit of a credit union is that your money is helping local people, rather than distant shareholders. If you save money, all your pennies are going towards helping your local indie shops take out affordable loans, to stay in business. Or helping a young family furnish their home etc.
The big difference is that credit unions encourage you to save, rather than try to get you to take out loans. If you do take out a loan, it’s only done after you have a history of several months of saving with them. And the rates are set by law, so won’t be astronomical. Although a quick online comparison shows that larger loan rates are around the same as the major banks, the big difference is that you can take out smaller loans. So Barclays online calculator will only let you start calculating at £1000 (thus getting people to often borrow more than they need). But with a credit union, you could borrow £200 for a washing machine, and pay it back in small amounts over a year.
Credit unions are protected by the Financial Services Compensation Scheme (so offer the same level of protection as with banks and building societies – currently up to £85,000 per person).
Find a Local Credit Union
- Find Your Credit Union (just enter your postcode, profession or religious organisation).
- My Community Finance can match you with savings accounts run by local credit unions, if you have suitable ones nearby.
- Engage Bank is a community bank, run exclusively for people who are members of credit unions. It offers virtual savings envelopes and contactless payments by debit card or phone, plus soon you will be able to pay in money through a loca post office. See real time account balances and pay bills by transfer, standing order or direct debit. You can also send and request money.
Two Major Credit Unions
Most credit unions are nice little outfits for towns and villages. But in the bigger cities, the credit unions are much larger and can rival the big banks in the services they offer. Just imagine if all local people switched, the changes that could occur, and the ripple effect it would have elsewhere.
London Mutual Credit Union has over 30,000 members and offers general, teen and junior savings accounts, plus salary deduction. It has a variety of affordable loans for those who need them, and plenty of online budgeting tips. Started in Southwark, it also offers online banking.
Great Western Credit Union is a recent merger with Bristol Credit Union, which is one of the biggest and most successful in the land. You can open a saver account with just £1 and pay back money from the Family Finance Plan with child benefit. Covering most people in southwest England, it offers a range of savings plans (including for children) and cash ISAs. Bristol is England’s greenest city, so it’s no surprise you can even apply for a solar loan, to install a solar panel on your roof!
Banks do not create money for public good. They are businesses owned by private shareholders. Their purpose is to make a profit. John Rogers
There are massive forces in the world, to tell you of the benefits of debt. They will tell you that by borrowing, you establish legitimacy in the eyes of lenders. That you can have tomorrow’s pleasures at today’s prices. They will dress debt up in a suit, and call it credit. But it all comes down to the same thing; You have mortgaged your future to pay for your present. And this is something you don’t ever want to do. Kent Nerburn
