With so many different financial institutions to choose from it can be quite difficult to decide where you should invest or save your money.
UK residents are showing the world that credit unions can be better and help you to save and grow your money when compared to traditional banks. With approximately 500 registered credit unions in the UK and over 1.8 million members, this is a difficult claim to dispute.
What is a credit union?
Credit unions are member-based non-profit organizations in which the members of the credit union are also the owners and, therefore, have a say in the manner in which the credit union is run. But that’s not all – because the members are also owners, they enjoy benefits that customers of banks do not.
Apart from their friendlier approach to finance, better interest rates, and the ability to obtain finance quickly and easily, credit unions also give something back to the community.
Here are six reasons why credit unions are becoming a popular choice in the UK.
#1) Feel like you are part of the family
Because credit unions were founded with the ideology of assisting people and growing the community, they do not have tricks up their sleeves to generate higher profits for themselves. The customer-centred approach they adopt allows for greater accessibility and a more people-friendly environment which is why members love them.
The shift from a profit to a non-profit model allows the credit union to focus its efforts on providing superior customer service instead of raking in profits. This means that members of a credit union often feel more at home once part of a credit union than when they were customers at a traditional bank.
Because credit union members are also the owners, they have a significant amount of influence in the way that the credit union is run. Credit union members have reported that they enjoy having a say in the way that their money is handled specially since traditional banks offer no or very limited inclusion.
#2) Developing a community presence
Credit union programs might differ based on location, but one thing remains the same: they are all committed to community betterment. And, the best part is, that you can be a part of improving the community when you become a member.
As an example, the credit union could offer scholarships or grants to worthy students in the community to enable them to study further. By investing your savings in a credit union, you can help the community you live in and, in return, other members will help you.
Because the members act as shareholders, they reserve the right to partake in important decision making that can impact the community. One such decision includes selecting board members which are done via a vote.
#3) Higher interest on savings accounts
Traditional banks are committed to making a profit on their investments and loans so that this money can be reinvested for greater return. However, credit unions do not have this same approach which is why they can offer higher interest rates on their savings accounts.
These higher interest rates result in a better return on investment for the member and, at the end of the day, the more money the member is investing in the credit union, the more money is available at the disposal of the credit union.
Credit unions, like traditional banks, also ensure the money in your savings account to secure you against financial loss. On top of this, members are also receiving a dividend yield from the credit union which means more money in your pocket!
Credit unions investment accounts either payout once the investment has matured or payout interest monthly with an average AER (annual equivalent rate) ranging from 2.0 percent to 2.5 percent per annum.
#4) More forgiving loan qualifiers
Loans and credit card rates fall into the same boat as savings accounts: the credit union is not looking for ways to earn a profit, so they do not need to overcharge their members on fees and rates. With potential loan rates of under 6% per year, borrowers can expect to repay approximately and an additional £43 on a loan of £100 borrowed over a year.
Credit unions also tend to be more forgiving and lenient when it comes to the loan qualifying criteria which means that obtaining a loan is often easier with a credit union than with a traditional bank even with a poor credit rating.
Even those without a credit history have the opportunity to obtain a loan. If a member finds themselves in a position where their credit score is too poor for a loan, the credit union will work with that individual until they can find a loan for which they can qualify.
#5) Credit assistance at your service
Every credit union has a certified credit counsellor. This individual is responsible for helping members of the union to become financially fit and informed so that they can make financially stable decisions.
Once the counsellor is aware of the member’s short-term and long-term financial goals, past debts, current debts, and credit score they can help develop a plan of action to ensure the member can reach a point of financial prosperity.
#6) Banking & so much more
The perks of being a member of a credit union are already extensive, but some perks extend beyond the banking sphere. Some credit unions offer other products like health insurance which members gain access to as soon as they complete the membership forms.
Financial education is also a basic that is supplied to ensure that the community becomes more financially conscious and this education is free. Some credit unions even go as far as to provide education that is outside the sphere of banking.
Even though credit unions are great there are some minor setbacks to using them in place of a traditional bank.
Let’s have a closer look
- Membership is a must – to become part of a credit union you need to reside in the area or be employed by specific groups. Joining is also not free: there is often a membership fee that needs to be paid along with a minimum savings deposit amount.
- Limited branches and ATMs – as credit unions are community-based, there are only a few branches that can become quite inconvenient. However, most credit unions are affiliated with major ATM networks so you can still access your money in most places.
- Limited tech – traditional banks have the money to finance new technology like mobile banking apps and online banking. However, because credit unions are focused on aiding the community, they may not have the disposable income to finance such projects.
While it is undoubtedly that the above setbacks can result in minor inconvenience, it is nothing that has not been dealt with in the past. A few inconveniences do not measure up against the six reasons why credit unions are becoming so popular in the UK.
If you are considering relocating or are simply looking for a new bank to handle your finances, then begin your search with credit unions. You will be welcomed with open arms and you will walk out with a completely new outlook on financing and more money in your pocket.