Credit unions are co-operative financial institutions with local members (or members in the same trade). They provide savings accounts and low-interest loans, and members get dividends instead of interest. One of their prime purposes is to promote thrift and frugality, and members are generally encouraged to save rather than borrow. They are for everyone – including people on low incomes.
Loans are offered from members’ savings, and dividends are paid from interest received on loans. That’s it. They don’t get involved with risky Ponzi schemes for making more money, so will never get caught up in the kind of sub-prime mess the banks did. The credit union sector emerged unscathed from the 2008 crisis.
Click here and here for introductory information and resources on credit unions.
You can find a list of UK credit unions at Find Your Credit Union.
Most credit unions allow you to join online, or you can fill in a form and start saving. You can move your savings account from your bank, and approach your credit union for a loan if you need one, rather than your bank (it will be much cheaper). The law recently changed to allow credit unions to offer current accounts. Ideally, why not see if your credit union has a current account, and use that too, and close your conventional bank account altogether?
If there isn’t a credit union in your area, and you’d like to start one, ABCUL can provide training, information and advice, as can individual credit unions. It might be an idea to volunteer at a credit union first to get more of an idea of how they work.