As the cost of living crisis continues, people are increasingly looking for ways to improve their financial wellbeing, with credit unions proving a popular alternative to high street banks and other financial institutions among people struggling to make ends meet.
Indeed, the Bank of England’s Credit Union Quarterly Statistics estimate there were approximately 250 credit unions in England, Scotland and Wales with more than 1.4 million members at the end of June 2022.
So if you’ve been wondering “should I join a credit union?”, why not come with us as we take a look at the main advantages on offer and why so many people find them so valuable.
When you open an account with a credit union, you become one of its members.
Whereas banks are for-profit businesses with shareholders to answer to, credit unions are not-for-profit businesses that are only responsible for their members’ financial wellbeing. This means they can focus on creating the best possible customer service experience for their members, instead of trying to generate profits at every opportunity, and it is this ‘customer-friendly’ approach which many people love about their credit union.
Credit unions are also often more willing than banks to help you if you have a low credit score or are temporarily out of work. At Leeds Credit Union, our credit scoring system is not the same as other banks or building societies, so we may be more likely to accept a person’s application even if they have no credit history.
Because credit unions are owned by their members, they listen and react promptly to their questions and concerns. They also take their members’ feedback and use it to make positive changes to the way they work, enabling them to introduce new loans, savings accounts and policies specifically tailored to their members’ needs.
Unfortunately, some lenders still offer loans to people who are unlikely to be able to afford the repayments in order to make money. Unlike these lenders, credit unions always have the best interests of their members at heart and this is especially true when it comes to loans.
Whatever people need the money for, regardless of the amount, credit union loans are built around their members, with them typically offering a range of flexible and affordable loans that have fair and competitive interest rates which are capped by credit union legislation.
This ensures nobody is encouraged to take out a loan with unaffordable repayment rates and everybody who needs support can access it.
If you’re a member of a credit union, in addition to financial products, you’ll also have access to advice, such as how to borrow responsibly or how to develop an effective savings habit.
It is common knowledge that financial health impacts mental health, with this report from database company Statista revealing that monetary stress is the second biggest cause of stress in the UK. However, having access to financial information and advice helps people manage their finances better and can stop them developing stress-related mental illnesses that prevent them from acting to improve their financial situation.
There is a misconception among some people that banks are inherently safer than credit unions. While this is an understandable concern, the truth is that credit unions are every bit as safe as high street banks.
Credit unions are authorised and regulated by both the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), which protects their members by ensuring they are run to strict regulatory standards.
Furthermore, members’ savings are protected by the Financial Services Compensation Scheme (FSCS), meaning that if anything DID happen to your credit union, your money would be safe and your finances would remain intact.