Banking, loans and cards

How a credit union can help you

Credit unions have had a good few years.

While so many other financial products and institutions have come under fire, credit unions have enjoyed seeing their reputation soar, and for many people they now represent good old community banking.

But how do they work, and are you eligible to use one?

A credit union is a co-operative organisation owned by its members. Unlike a bank, it doesn’t have shareholders, so any “profits” go back to its customers in terms of an annual dividend for savers.

But they are regulated by the government, so your money is just as safe in a credit union as it is in a bank.

Traditionally, credit unions had a reputation of helping only those who found themselves excluded from mainstream finance, but that reputation is on the way out. It’s true that they offer an alternative to other less savoury forms of sub-prime finance, but many people who might otherwise use a high-street bank are opting to use credit unions instead.

As the name suggests, a credit union is aimed at a particular group of people with a shared situation. Some unions are location-based, meaning membership is open to residents in a certain part of a city, for example, while other unions are based around a particular industry or job, such as the Radio Taxicab Credit Union, which is for people associated with London taxis.


How to borrow and save

A loan from a credit union is much more competitive than a payday loan. It won’t be a market-leading rate, but it won’t charge you extortionate interest, either. As a rule of thumb, a union will lend only to members who have spent some time as savers.

Members who save with their credit union technically don’t earn interest. Instead, they receive an annual dividend, based on the profits from the union.


How do I find out more?

The Association of British Credit Unions has more information at, including details of any credit unions near you.