What Is a Credit Union and How Is It Different from a Bank?
Credit Unions: Member-Owned Finance
A credit union is a financial cooperative owned by its members. Unlike a bank — which is owned by shareholders and maximises their returns — a credit union exists solely to serve its members, returning any surplus as better interest rates on savings or lower rates on loans.
Who Can Join a Credit Union?
Credit unions have a "common bond" — a shared characteristic that all members must share. This might be living in a particular area, working for the same employer, belonging to a professional association, or being part of a specific community group. There are over 400 credit unions in the UK, covering an enormous range of common bonds.
What Credit Unions Offer
- Savings accounts: Pay dividends (a share of profits) rather than interest — often competitive with traditional banks
- Personal loans: Typically at lower rates than commercial lenders, especially for members with limited credit history
- Current accounts: Many credit unions now offer full current accounts with debit cards
- Affordable credit: Better terms for members who might otherwise turn to high-cost lenders
How Credit Unions Differ from Banks
Banks are profit-driven businesses accountable to shareholders. Credit unions are not-for-profit cooperatives accountable to members. In practice, this means credit unions often offer better loan rates for people with average or poor credit, and treat members as people rather than numbers.
Credit unions are regulated by the FCA and PRA. Member savings are FSCS-protected up to £85,000.
Finding Your Credit Union
Use the Find Your Credit Union tool at findyourcreditunion.co.uk to search by location, employer, or community group. Many local councils, NHS trusts, and police forces have dedicated credit unions offering preferential products to their staff.
