Credit union savings accounts

In credit unions members pool their savings and lend to one another. Members have something in common, such as the same employer, trade union, attending a specific place of worship or living in the same area. Credit unions are not-for-profit organisations that use the money they earn to offer financial services such as savings and loans for the benefit of their members.

Is a credit union savings account for you?

A credit union savings account might be for you if:

  • you want a flexible account that lets you save what you can, when you can
  • you like the idea of saving with an organisation owned by and run for the members that use its services
  • you’ve had difficulty opening an account with a bank or building society
  • you want savings or loan protection insurance, which often comes free with credit union accounts.

How credit union savings accounts work

  • Credit unions are member-run organisations where members pool their savings so they can lend to one another.
  • The members of a credit union have something in common, such as working for the same company, living in the same area or belonging to a certain church or trade union. This is called having a ‘common bond’. Credit unions often have multiple common bonds.
  • There are several ways you can save with a credit union – via local collection points, by direct debit or by having money deducted directly from your wages.
  • Some credit unions offer a fixed rate of interest on savings, but most give you a yearly pay-out called a ‘dividend’. The dividend is the way in which the credit union shares its profits with its members and the amount you receive, if any, will vary depending on how much profit the credit union has made in the year.
  • All credit unions offer basic savings accounts and loans. Some also offer additional banking options, such as ISAs, children’s savings accounts and even mortgages.
  • Credit unions are owned by and run for their members. Instead of paying out earnings to external shareholders, they use the money they earn to improve services and reward their members.
  • Credit unions vary greatly in size – some are small community groups while others have thousands of members.
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Risk and return

  • Credit unions have some restrictions placed on what they can invest in and how much money they can lend out.
  • The more you save, the larger your share of the yearly dividend pay-out will normally be.
  • Dividends can be low, or even zero, if the credit union isn’t generating a surplus. Members vote at the credit union’s Annual General Meeting on the level of dividend to be paid. Every member gets a vote, no matter how much they have in savings.
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Access to your money

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  • You can usually withdraw money at any time.
  • If your savings account is a ‘Notice’ account, you’ll have to give the credit union a set amount of notice to make a withdrawal.
  • Some credit unions will give you a debit card that you can use at a normal high street cash machine.
  • You can usually take out cash at the local credit union office or sometimes arrange a transfer to your bank account.

Charges

Generally credit union savings accounts do not make charges but check with individual providers.

Safe and secure?

As with most UK high street banks and building societies, money saved in a credit union is covered by the Financial Services Compensation Scheme (FSCS). The FSCS savings protection limit for consumers is £85,000. If you have more money than the limit, some of your money will be at risk if your bank, building society or credit union fails.

How to open an account

The first step is to find a suitable credit union and become a member.

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When joining, you’ll need to provide ID and proof of address.

Before you open an account use the link below to check your chosen credit union is regulated by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA).

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Tax deduction

Credit Unions do not, by law, have to deduct tax from dividends – it’s the responsibility of the member to declare their dividend for tax.

If things go wrong

Because credit unions are regulated by PRA and FCA they must meet certain standards.

This means if you have a problem that you can’t resolve with them direct, you can complain to the Financial Ombudsman Service.

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Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

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