Credit Unions Unveiled - Wealth-Wisdom Wednesdays

What are Credit Unions? Not for profit financial cooperatives owned and controlled by members.



How did they begin?

They started off in America and Canada and were based on the premise that people could help each other via a cooperative. Before 1979 there was no legal structure so some early CUs were formed under the Companies Act and others under the Industrial and Provident Societies Act. In April 1979 the Credit Union Act came became law. There are some 40,000 CUs around the world with about 118m members and just over 3/4 million members in the UK.



How can this organisation help me? A CU can help you in at least two ways (initially). 1. Learning to save regularly and 2. Borrowing. Some also offer other services such as... Current accounts and even Child Trust Funds and a new area they are moving into is Life insurance. You should contact your local CU office for more details of their individual services.



What are the joining requirements? CUs usually have a Common Bond which means their membership is based on certain factors, such as, Association, Employment, Live or Work or Residence.



What are their borrowing requirements? These vary, generally you must be a regular saver before they will borrow you any money. These loans are usually unsecured and are charged at a fixed rate. There are no set up fees, no hidden charges or repayment penalties.



What do I need to do once I find my local organisation? You will need to contact them and i. probably fill out an application form, ii. Pay a one of membership fee, iii. Complete a standing order form to begin your savings journey.



How are they able to loan money at much better rates? Because they are run by members for the benefit of members.



What is the maximum I can borrow? This varies from one organisation to the other and each application is assessed based on merits



What if I want to withdraw my money after I've been saving for a while? Quite simply fill out the form for your CU and they will usually send you your money back within about 5 days. Allowing time for processing.



Will I receive interest on my savings? Rather than paying interest, income from loan repayments is used to meet their running costs. They also keep some of the money in reserves and pay a dividend payment into your account.



There is no Credit Union in my area, what can I do? You can contact the Association of British Credit Unions to find out about any other options.



How can I be sure my money is safe? Since 2002, CU's have been regulated by the Financial Services Authority (FSA) in the same as UK banks and building societies. This means that the Financial Services Compensation Scheme will repay deposits up to £50,000 (as with banks etc).



I'm unhappy with my local Credit Union, what can I do? Follow their complaints procedure and if you get stuck, your complaint can be taken to the Financial Ombudsman Service.



Who governs Credit Unions in the UK?

The Association of British Credit Unions is the main trade association for Credit Unions in Britain (England, Scotland and Wales). The ABCUL provide information, representation and training to member Credit Unions.