What is a credit union?
A credit union is a financial co-operative which offers safe savings account and low-cost loans to members. Credit unions are regulated by the Financial Services Authority (the UK's financial services regulator) and each credit union in the Northern Money directory serves a particular geographical area, called a 'common bond'.
In a credit union, members pool their savings to lend to one another and may also help to run the credit union. The small amount of interest raised by loans pays for credit union overheads (passbooks, etc) and any surplus may be paid out as a dividend to members who have savings.
Click on the image below to watch Shelagh Barton from Bridges - Your Community Bank (formerly South Tyneside Credit Union) talk about their credit union and the benefits of joining. Members and volunteers also share their experiences:
Credit unions are great because...
• Everyone is welcome, it is easy to join and you receive a personal, friendly service
• Flexible ways to save, from as little as £1 per week
• A range of services are available, including Junior Savers accounts
• Your money stays within the local community
• Regular savers who are over the age of 18 can apply for a low-cost loan (minimum £50)
• Quick loans for non-members may be available from some credit unions
Credit unions aim to help you take control of your money by encouraging you to save what you can. Once you have a reliable record as a saver, you can apply to borrow money. Credit unions will let you borrow what you can afford to repay.
A credit union may suit you if:
- you don't want a savings account from a high-street bank;
- you want the flexibility to save what you can, when you can;
- you want a low-cost loan and you prefer to pay it back weekly, fortnightly or monthly
- you don't want to pay a fortune to borrow money from doorstep lenders, pawnbrokers or pay-weekly stores on the high street
- you prefer to support a local cooperative.
Many credit unions offer more than just savings accounts and loans. Credit unions can offer a whole range of different financial products - 'Quit and Save' for people cutting down on smoking, Family Funeral Plans, Payroll deduction savings schemes, Christmas savings accounts and Furniture schemes to supply cookers, fridges and other household items. Check with your local credit union for further details.
I've already got a savings account with a bank or building society, why should I join?
Some members make an ethical choice to save regularly with their local credit union, in addition to using savings accounts from high street banks and building societies. In this way, members are choosing to support their local community and their local economy by helping the credit union to establish a big pool of savings which can then be lent out to members who need a loan. Your money is safe and you could be earning a dividend.
Generally speaking, if more local residents borrow money from their local credit union instead of using doorstep lenders, pawn brokers and pay-weekly stores, less interest is paid back. This means that residents have more money in their pockets to spend on things they need, benefitting the local and regional economy.
The Northern Money postcode search can direct you to credit unions in Cumbria, Northumberland, Tyne and Wear, Durham and Tees Valley but there are credit unions all over the UK.
The Money Advice Service is a free, independent service which gives clear, unbiased money advice to help people make informed choices.
It was set up by government and is funded by a levy on the financial services industry. Advice and information is available online, over the phone and face to face. It provides tailored money advice to help you make choices throughout your life, whatever your circumstances.
The Money Advice Service believes that the right money advice can make a difference to people’s lives. And when people take steps to manage their money better, they can live better too. Click here to visit the Money Advice Service website or call 0300 500 5000.
Free printed guides can be ordered online - click here to browse the list of free printed guides available from The Money Advice Service.
Why not try the Money Advice Service Financial Health check to help you make the most of your money?
You can also read more about credit unions on the 'Frequently Asked Questions' page of the Northern Money website, or watch this video to find out more:
"Why Credit Unions are for everybody" © Glasgow City Council (used with kind permission)