A summary of the credit union sector
Credit unions offer a wide range of financial products and services to suit consumers from all walks of life.
All credit unions offer savings accounts and loans. Many offer a wide choice of additional products such as junior savings accounts, Christmas savings accounts, prepaid debit cards, insurance products, cash ISAs and in some cases even mortgages.
There’s no "one size fits all" rule in credit unions, and there is great diversity in the sort of service and access points that different credit unions offer in order to meet the different range of consumer preferences and expectations.
Some credit unions will run one or more branches or service points to offer a face-to-face cash service. Others will exclusively offer an online or phone banking service. Some credit unions have developed an app for mobile devices and make instant loan decisions, while others prefer to interview all prospective borrowers.
Whatever kind of credit union you’d prefer, there’s a good chance you’ll find the one you’re looking for.
Credit unions encourage all their members to save, and as well as a basic savings account, many can offer a range of options including Christmas savings accounts, notice accounts with higher returns, junior savers’ accounts, and even cash ISAs.
Members can pay in directly by payroll deduction or through benefit direct accounts; through retail payment networks such as PayPoint and PayZone; by standing order or direct debit, or in cash at local offices and collection points.
As the credit union’s only shareholders, a successful year for the credit union will see members receive a dividend on their savings – which could be as high as 3% in some cases.
And there’s no need to worry about the money you save in a credit union, as all deposits in a credit union are protected by the Financial Services Compensation Scheme up to the value of £85,000 per person – exactly the same level of protection as savings in a bank or building society.
Employer payroll scheme
Starting a credit union payroll scheme is a perfect low-cost way to reduce absenteeism and increase productivity by boosting morale. It can also help a business reach their corporate responsibility goals.
Debt and money worries have been shown to cause stress, which in turn is the leading cause of sickness throughout British industry, so it makes sense to look after your employees. By helping them save a small amount regularly and have access to affordable loans, they’ll be less stressed about finances and able to focus more on work. The feeling of being looked after by an employer can also increase staff retention, as they feel more motivated, more valued and consequently, less likely to leave their job.
A payroll scheme is usually free to set up and there is minimal admin involved in arranging staff deductions. All services are managed directly by your credit union, free of charge from them and they accept full responsibility for the scheme’s operation. Many can even create tailor made packages to suit the needs of individual companies.
- Strengthens Corporate Social Responsibility
- Helps employees cope with any financial distress or unexpected costs
- Provides a valued staff benefit for minimal cost
- Helps with recruitment and retention of staff, building employee loyalty
- Reduces stress levels and resultant absenteeism
- Money invested in a credit union benefits your local community, not private shareholders.
Furthermore, setting up a credit union payroll deduction scheme puts you in excellent company. Here are just a few of the major UK employers who already offer their workforce a scheme through a credit union:
- BAE Systems
- Royal Mail
- British Airways
- The NHS
- Go-Ahead Group
Credit unions offer loan products suited to your individual needs and at rates you can afford.
Because credit unions are focused on serving their members rather than maximising profits, credit unions are often able to the sort of smaller, shorter term loans that many banks simply do not offer – and for which other specialist lenders charge very high interest rates.
The maximum any credit union will ever charge for a smaller loan is 3% per month on the reducing balance, which works out as 42.6% APR. This means the most expensive credit union loan in Britain is still eight times cheaper than a payday loan charged at their cap.
Of course, the vast majority of credit union loans are made well below the maximum interest rate. A Government-commissioned study in 2013 found that credit unions offer the best value to consumers on loans up to £2,000, and some credit unions will charge interest rates of 5% APR or even less for larger loans of over £5,000.
Why use a credit union?
There are many great reasons to join a credit union:
- Credit unions help you save regularly, borrow responsibly and keep on top of your finances.
- Many employers have partnerships with credit unions which allow staff to save and repay loans direct from payroll.
- Credit unions offer affordable loans, which can range from shorter term loans of a few hundred pounds to much larger loans for holidays, buying a car, home improvements or even a mortgage.
- Credit unions offer very competitive rates on loans of all sizes. For smaller sum loans, interest on credit union loans is always much lower than that charged by doorstep lenders and payday lenders.
- Credit unions make it easy to save – even a small amount saved each week will soon mount up.
- As co-operatives, credit unions share their profits with their members. This often means savers will receive a dividend on their savings every year, which could be as much as 3%.
- Credit unions are often able to offer credit to people whose circumstances might mean they struggle to get a loan from other lenders.
- All money saved in a credit union is protected by the Financial Services Compensation Scheme up to the value of £75,000 per person – exactly the same level of protection as savings in a bank or building society.