If you’re curious whether it’s better to save with a credit union or a bank, you’re in the right place. Banks and credit unions have their advantages and disadvantages. Here, we’ll take a look at eight of the main benefits of saving with a credit union
1. Commitment to members
Credit unions are not-for-profit organisations. This means they are owned by their members. The fact that credit unions are member-owned means their members are always the number one priority because these are the people who ultimately make the business decisions about the direction the company takes.
Profits made by the organisation solely go towards the business’s running costs. Surplus profits go back into the credit union members’ pockets. This means that more of the interest made on your savings ends up back in your savings account.
At Metro Moneywise, members are shareholders who have a say in the organisation’s choices. Every member has a vote in the annual general meeting. Members can also apply to be on the board of directors.
2. Specialist financial knowledge
One of the significant differences between banks and credit unions is that credit unions have a ‘common bond’ with their members. A common bond is something that all its members have in common such as a location or an industry. Some businesses partner with a credit union that has a common bond with their industry, and then all the employees of that business can become members of the credit union.
Because of the way credit unions are run (democratically for the benefit of all members), having a common bond means the credit union is always working towards the best interests of the entire group of members and shareholders, all of whom have a social connection.
As a result of their common bonds, credit unions often develop a strong, specialist interest and knowledge of finance in a particular area. For example, Metro Moneywise has a common bond in the healthcare sector. This means we’ve worked with NHS trusts and their employees long enough to understand how savings work best for our members who work in healthcare.
If you’re an employee in an NHS trust based in Manchester or Rochdale, check our application page to see if your employer is one of our payroll partners.
3. Lower fees than other institutions
It’s often cheaper to save with a credit union than with a standard bank. Unlike banks, credit unions don’t need to make profits for their investors. Bank fees such as maintenance fees, service fees, overdraft interest, transfer fees, and ATM fees don’t apply to credit unions.
Most credit unions ask for an annual membership fee, which is usually relatively low. Ours is £3.50 per year. When you add everything up, credit unions are cheaper than banks for account holders. Talk to a member of our team to find out exactly what to expect when you sign up to Metro Moneywise.
4. Attractive savings interest rates
Because credit unions don’t have to worry about paying profits to shareholders, members get better rates of interest in their savings. Credit union savings rates are more commonly called dividend rates because, rather than paying back a percentage of savings, credit unions pay back dividends at the end of the year.
Members will get an annual dividend at the end of each year for the interest accumulated on savings. On average, credit unions offer higher interest rates than high street banks. This is usually between 1% and 3%, but it can rise to as much as 8%. At the end of the year, the dividends (profits) made by the credit union are shared between members. You can’t tell how much you’ll earn from your credit union in dividends until the end of the year. However, it makes a tidy bonus.
5. Easy to talk to
Because of how credit unions are run, they highly value their members’ well-being. Credit unions are easy to contact and speak to whenever you need help compared with banks that are slowly removing more and more brick-and-mortar branches, and speaking to a person becomes more difficult.
A credit union is an excellent support network if you have any concerns about managing finances, how loans work or saving up. Advisors at your credit union are committed to helping you become financially independent and make the most of your money.
Credit unions are always on the side of their members because these are the people who run the organisation. They are known for having friendly staff ready to help if you have any questions about saving with them and they won’t confuse you with complicated financial and legal jargon.
6. Extra perks for members
Many credit unions offer members extra perks in addition to credit union services.
Metro Moneywise’s member perks include:
- A vote in our annual meeting.
- Handy resources and helpful tips in our blog.
- Access to all the same services for family members.
- Entry into our annual lottery for a chance of winning £1,000.
- Lifelong membership (even if you change jobs outside of our common bond).
7. An alternative to a bank account
You need to meet certain requirements to open a high street bank account. If you have a poor credit rating, it could affect your ability to open a bank account. Credit unions have one advantage over banks: they offer a supportive alternative.
Credit unions often accept people with lower credit ratings, giving more people an opportunity to start saving and improving their credit rating scores. Instead of expecting people to meet rigid expectations as banks do, credit unions are more open to adapting their savings requirements and loan schemes to work with peoples’ challenges. Instead of being automatically turned away, you might be asked a few more questions by a credit union while they find a way to help you.
If you want to open a credit union savings account, they may run a credit check on you, but if you have a bad score, they won’t simply turn you away. They’ll work with you to find the best solution so that you can work on your financial independence.
Read our article How to Find the Best Credit Union for Savings Accounts to help you find the best credit union for you.
8. Personalised service
There’s no one size fits all credit union. Because of their human-centric nature, credit unions aim to find the best solution for every member. That means helping them to decide what way of saving works best for them. It also means working to find the best type of credit union loan if they ever want to borrow. At a credit union, you’re more likely to find dedicated staff
committed and invested in your well-being and financial security. At Metro Moneywise, this is one of the most vital aspects of the business, and we’ll do everything we can to help you make informed financial decisions.