The financial services industry dominates advertising and news coverage, which is to be expected as finances are an everyday concern for people. There are thousands of different companies competing to help manage people’s finances, and it is not always easy to make comparisons in order to see what best suits their needs at any time. The BBC has spotlighted Credit Unions in their recent comprehensive, documentary ‘A matter of Life, and Debt’.
The key differences between local Credit Unions and high street banks can sometimes get lost or become obscured in the vast ocean of information. Listed below are the top three differences between Credit Unions and banks.
1. Stakeholders are the Shareholders
People don’t just join Credit Unions as customers; they become part of the credit union itself as shareholders. If you are approved for membership by any Credit Union, you become a shareholder. This means Credit Union members have the right to attend yearly AGMs (Annual General Meetings) where they get to see the people who run their Credit Union and vote on different issues.
As shareholders in the Credit Union, people in the local community have a direct influence in how the business operates, including whether dividends of profit are paid to members based on their savings. As such Credit Unions are designed to be owned by the local community, governed by the local community and for the benefit of the local community.
2. Roots in the Local Community
Credit Unions are locally based, not-for-profit organisations, and they can only offer membership for people who work/live in their catchment area. This means that Credit Unions are not competing nationally for attention and business, which gives them the freedom to focus on providing affordable, ethical loans and other financial services to members. This aspect gives Credit Unions the freedom to be accessible to existing members and build relationships.
Credit Unions often work with local councils and community groups, and their work has been recognised by the central government and members of the Royal Family. Through payroll deduction partnerships, such as NHS hospitals and local employers, credit unions made it easier for their members to save. Being plugged into the local community allows Credit Unions to ascertain and focus on what our members need and respond accordingly by introducing new services such as current accounts, jam jar (bill payment) accounts and other innovations.
3. Ethical Lending and Social Responsibility
There isn’t pressure put on Credit Unions to generate increasing profit, so it allows Credit Unions to exercise responsibility to make sure every decision is made in the best interest of their members.
Credit Unions play a unique role within local communities, as they are well placed to provide financial education (via working with local schools and young people within the community) as well as promoting good financial well being for everyone.
Members are not tied solely to their Credit Unions and some do have different bank accounts, but Members enjoy the benefit of having another option and support from their local Credit Union. You can find out where your local Credit Union is by visiting https://www.findyourcreditunion.co.uk/