Banks are paying millions of us pitiful rates on our savings. At the same time they’re refusing to lend to anyone without a near-perfect credit score. A short-term solution? It’s time to give credit unions a look.
Britain’s 450 credit unions let people in a local community, workplace or other organisation save and borrow money.
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. What’s not to love?
How credit unions measure up
Granted, chances are you’re going to receive a bit less on your savings from a credit union than you could get by switching to a Which? Best Rate savings account. And savings rates aren’t guaranteed, but are linked to the profit made by the credit union, paid out as dividends.
I’ve just had a look at the rates on offer from my own local credit union in Tower Hamlets. It claims to pay adult savers 1-2%, but pays more to young savers, encouraging them to get into the savings habit early.
Plus, all deposits up to £85,000 are covered by the Financial Services Compensation Scheme (FSCS). Anyone looking for a non-bank way to save and who lost money in the Farepak debacle a couple of years ago will welcome this protection.
Save – and get a warm glow
Not only that, but your money will be doing good in your local community, supporting consumers struggling to access affordable credit and helping them to avoid expensive payday and doorstep loans, not to mention rip-off loan sharks.
Credit union loans are limited by law to 26.8% APR – many credit unions charge much less than this, but even at the top rate they’re much, much cheaper than a payday loan, and come with just as much flexibility.
I’m not suggesting that you cash in all your savings and investments and stick them into a credit union. But as part of a balanced savings and investments portfolio, a credit union could be a great way to support your local community, force the big banks to up their game, earn a bit of interest and know that your savings are safe. And every account comes with a free fuzzy glow.
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