Joining the union

If you're just about at the end of your tether with your bank, at long last there's an alternative to high street current accounts that aims to be cheaper, more straightforward and transparent. Credit unions, although not as popular in this country as they are in others such as the US, are now able to provide current accounts and they could offer a refreshing change from the mainstream providers who have been getting a bad press because of overcharging and hidden fees.

What are credit unions?

Credit unions are financial co-operatives or 'people's banks' owned and run by their members. They are set up by a 'common bond' which determines who can join it. The bond could be people living or working in the same area, people working for the same employer or members of an association. While the number of credit unions has actually fallen from almost 500 in 2001 to a current 350, the number of customers has grown substantially. In September 2006, there was a total of 620,000 customers - up considerably from the 284,500 recorded in 2001. Between 1995 and 2005, total savings held in credit unions grew to £380 million from £57 million and loans expanded to £353 million from £54 million. Assets currently stand at around £500 billion. Leeds City Credit Union is one of the largest credit unions with seven branches.

Credit unions - another string to their bow

Until now credit unions have been restricted to offering savings accounts, investments, short-term personal loans and mortgages. The addition of current accounts means that people without a bank account have an alternative to the basic bank account, which was introduced by many high street banks and the Post Office in April 2003 at the request of the government.

At the moment current accounts have been run as a pilot among nine credit unions out of a total of 350. Lucia Webster, head of membership services with the Association of British Credit Unions said others are expected to roll out their current accounts over this year and they are serious about winning business from the high street banks.

21 March 2007 © Moneyextra.com

back

Moneyextra.com recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.