Ethical Credit: A Guide to Credit Unions and Their Successes
19 October marks International Credit Union (ICU) Day, which has been celebrated since 1948 to recognise the achievements and hard work of those in the credit union industry. To show our own appreciation, we’re telling you why we think they’re so beneficial, highlighting some of the UK’s best employers who are getting it right.
What are Credit Unions?
A credit union is a not-for-profit financial co-operative, who provide savings, loans and a range of other financial services to its members – who own and control it. Essentially, credit unions are owned by the people who use their services, and not by external shareholders or investors. The result? Services that are designed around providing the best return for customers rather than profit for the organisation. That means no hidden charges, impressively lower interest rates and total transparency to name just a few benefits.
Membership of a credit union is based on a common bond such as working for the same employer, within the same industry or falling into specific geographical location. They vary in terms of size, service offering and form however, all credit unions offer savings and loans with a vast choice of products available. Better still as co-operatives, credit unions share their profits with their members where savers for example, will receive a dividend on their savings every year, which could be as much as 3%.
Why we think they make a good alternative to bank loans
Because credit unions design loans around people rather than profit, they meet individual needs much more closely and at rates we can afford. So, if it’s a short-term loan you’re seeking, you’ll most likely be able to find it without the high interest rates the UK’s high street banks can sting us for.
The maximum any credit union will charge for a small loan is 3% per month on the reducing (about 42.6% APR) * which is still a whopping eight times cheaper than a payday loan charged at their cap. Unsurprisingly, the vast majority of credit union loans are made well below the maximum interest rate and their customer focus means we can trust them far more than we can trust many of the high street banks.
Who is doing it the best?
Employers tend to set up a payroll deduction scheme into credit unions for savings or the repayment on loans. Some of the major UK employers successfully adopting this for their workforces are the NHS, British Airways and Royal Mail.
Plane Saver is the credit union for British Airways, with over 11,000 members, they have lent over £100 million to date. While the NHS offer an entirely transparent credit union of secure savings, affordable loans and FREE life savings and loan protection schemes. They do this to more than 15,500 members across Scotland and the north of England. Finally, Royal Mail staff benefit from the Penny Post credit union, with loans from as little as £500, at a rate of 42.6% APR, up to loan sums over £15,000 at a competitive rate of just 4.9%APR.
So, are credit unions better than banks?
According to statistics from the Credit Union National Association (CUNA), 3.7 million people joined a credit union in 2015, reaching a record high of total members with growing numbers year on year.
What you are getting with banks is years of experience and a wider range of services, possibly added convenience with more commercial premises, ATMs and choices available. Credit unions do offer free or low-fee basic accounts but you won’t get the jazz hands surrounding it such as rewards, points and free coffee in-branch. But if it’s a range of services that offer security, accessibility and are designed for the people that use it, not the people that work for it – then find your credit union now.
How do you find yours?
The easiest way to find out if you are eligible is to find your credit union online, where you can search by your postcode, associations or employer.
If you would like to find out more about the UK’s high street banks, stay tuned to read our blog later this month – exposing the worst culprits for mis-selling products. If you feel you have been mis-sold any kind of credit, contact us now.
At Your Money Claim our aim is to fight your corner, whether it is helping you claim PPI compensation or providing you with knowledge on how to get the money you deserve.