If you want to see a return to a ‘traditional banking’ model, look no further – it already exists in the credit union. It’s now time for this Cinderella to take her rightful place at the banking ball.
Want to avoid lining fat cats’ pockets? Absolutely. Owned and controlled by their members, credit unions have no outside shareholders to pay. They are run by volunteers elected by the membership and any profit they make is used to develop the credit union and provide a return to savers.
Want a secure home for your savings? Got that covered. Credit unions offer full protection of up to £85,000 under the Financial Services Compensation Scheme.
Want a fair return on your money? Tick. New rules mean that credit unions can now pay interest on savings, rather than a retrospective dividend on credit union profits. This means you’ll know exactly what return you’ll get on your savings and will be able to compare the rates of return with those on offer from banks.
Want to borrow money at a fair rate? Yes, credit unions do this too. Your local credit union is unlikely to match the rates available from the cheapest high street lenders. But if you have a less-than-perfect credit history, a credit union loan is likely to be cheaper than an overdraft, an impaired-history credit card, a doorstep lender or the 2,000+% APR charged by payday loan companies.
Want a local community-based account? Credit unions have that covered too. There are around 450 credit unions in the UK, many of them based on local high streets. And even if there isn’t one near you, the new rules that came in this month mean that credit unions no longer need to prove that all eligible members have something in common.
Previously, credit unions have been hampered by restrictions which meant all of their members had to have something in common – such as living in the same geographical area or working for the same employer.
Will you take the credit union challenge?
I’m putting my money where my mouth is. Having just moved house I’m in the process of joining my local credit union.
However, I have to say that I found the application process frustrating. I tried to apply online and had to print off a PDF, fill it in by hand and post it to the credit union. Credit unions can’t hope to match the advertising and technology budgets of the big banks, but the website itself felt amateurish.
Credit unions offer the solution to many of the UK’s banking problems and should be supported wholeheartedly. That said, they need to up their game if they’re going to inspire public trust and compete with the big boys.