A new campaign aims to raise awareness of credit unions and position them as a viable alternative to the high-street banks for savers and borrowers.
In Ireland some 73% of people are credit union users, while in the US 45% of earners are members.
However, on this side of the pond, Britain’s credit union membership stands at just 2% of the working population.
But, as the credit union movement in Britain celebrates its fiftieth anniversary in 2014, a new campaign plans to raise awareness and boost membership of this form of community banking.
What are credit unions?
Credit unions are financial co-operatives set up to benefit their local community.
They are owned and controlled by their members, with volunteer directors elected from the membership.
How do credit unions work?
Members open a savings account where they make regular payments and these funds provide the basis for loans to other members.
The income generated by interest on loans helps credit unions fund their operating expenses, build reserves and pay savers dividends wherever possible.
There are around 400 credit unions across England, Scotland and Wales with assets of nearly £1bn and more than 1 million members.
There are 22 credit unions offering current accounts, and some even offer mortgages, cash ISAs and insurance products, according to the Association of British Credit Unions.
Is my money safe in a credit union?
Credit Unions are authorised by the Prudential Regulation Authority and regulated by the UK Financial Conduct Authority.
Like high street banks, credit unions are covered by the Financial Services Compensation Scheme, so all savings are protected up to a total value of £85,000 per saver.
Push to boost credit union membership
The new campaign, launched in Wales and backed by funds from the Welsh Government, wants to capitalise on the public appetite for alternatives to the big financial institutions.
Credit unions are also keen to attract the attention of middle and higher income earners as well.
Barry Roberts is the campaign spokesperson and general manager of North Wales Credit Union.
He says: "At the moment, even if people have heard of credit unions, they often think that they are just for those who may be grappling with financial difficulty.
"But the reality is that we offer loans, savings and investment products for everyone, whether they are saving for Christmas or a holiday, or taking out a loan for a new car or home improvements – and with no hidden charges.
"Plus, credit unions exist only to serve the interests of their members, rather than being focused on making profits.
Promoting responsible lending
"So, we only lend amounts that our customers can pay back and set repayments that they can make.
"And all of our products are absolutely transparent with conditions that are unusually favourable to the customer.
"For example, we never charge set-up fees or early repayment charges and only charge interest on the reducing balance of a loan, not on the original amount, which is the norm.”
Roberts adds that he believes people "are ready to consider credit unions as alternatives to traditional banks.
"They just need to know more about us – which is where this campaign comes in."
You can find your local credit union here. Find out more about the Credit Unions of Wales campaign here.
What do you think?
Are you a member of a credit union? Can they ever rival high-street banks?
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