Lincolnshire Credit Union Blog

Community news and information

A beginners guide to credit unions and how best to use them

Date added - 20 Jan 2016

Did you know that in Ireland around 75% of the population is a member of a credit union? This is compared to only 3% of the whole UK population being a member which has even doubled in membership over the past few years. So what are we missing out on and what benefits can you get by becoming a credit union member?

Traditionally, credit unions are a small, non-profit organisation set up by members with something in common to benefit their community. That common factor could be working in the same organisation, living in the same area or belonging to the same trade union. Credit unions in the UK mainly focus on providing a service to their communities such as the Lincolnshire Credit Union which only provides membership to those living or working in the Lincolnshire area.

Credit unions were created to provide a secure and ethical financial community. There’s no profit for third-party shareholders and the members of the credit union are the ones that decide how it is run. They are not a bank but they do offer services similar to one. They offer several different saving accounts and if you need that extra bit of cash it’s worth checking it out due to the willingness to make small loans of £100 to £7,500.

But can you trust a small organisation with your money? Definitely! Credit unions are authorised by the ‘Prudential Regulation Authority’ and are regulated by the ‘Financial Conduct Authority’. Anyone who becomes a member of the credit union will find their savings are safeguarded by the ‘Financial Services Compensation Scheme’.

The aim of a credit union is to reassure its members to take control of their money by encouraging them to save what they can and borrowing only what they can realistically afford. The credit union only works in a non-profit system so the cash it uses is only used to run the services and reward the members, and not to pay outside shareholders, like most other financial institutions.

There are several ways you can use the services of a credit union to your advantage. A ‘share account’ is the most common account; it’s essentially a savings account where you can place your money in without it ever being touched by someone else. They are largely flexible allowing you to save large sums weekly, monthly or whenever you can.

Credit unions don’t have interest rates but instead they have dividend rates. A dividend rate doesn’t rely on the financial climate of the markets but solely relies on how well the credit union is doing that year. Typically, dividend rates are 1-3%, but it could be as high as 8% of the sum saved.

Arguably the biggest incentive for people to join a credit union is their willingness to offer small loans of £100 to £7,500, which most high-street banks won’t do. They're a much cheaper alternative to payday loans and far less risky. Some credit unions can even get cash to you the same day. They are always willing to help those in need and regardless of your credit history they are always open to helping you out.

Joining a credit union is a low-risk, safe, ethical and smart way to organise your finances. At the Lincolnshire Credit Union you can give us a call on 01522 873550 if you have any questions about becoming a member. Alternatively you can check out our website and see what service suits you. Our aim is to provide access to reasonably priced financial services to everyone living or working within the boundaries of Lincolnshire.