What is a Credit Union?

A credit union is a not-for-profit financial co-operative, owned and controlled by the people who use its services. These people are referred to as Members rather than customers. Members share something in common, such as where they work, live, or organisations with which they are associated. This is referred to as the 'Common Bond' which is essential for membership. Credit unions are not-for-profit, and exist to provide a safe, convenient place for members to save money and to get loans at reasonable rates.

Why do credit unions exist?

To service the financial needs of their community, on a not-for-profit basis, and to retain members' savings in their community for the benefit of all the members.

What is the Common Bond?

The 'Common Bond' defines the field of membership of a Credit Union and is the factor that unites Members. Every Credit Union serves a group of Members that has a mutual interest.

Who can become a Member of a Credit Union?

Any person who shares the common bond, pays the membership fee ( £5) and fulfills the moneylaundering provisions in relation to proof of identity and residence when opening an account. Although it is possible to hold a juvenile account, a person must be over the age of 16 to become a full voting Member.

How does a Credit Union work?

The Credit Union uses savings from Members to fund loans to other Members. It pays savers a dividend for use of their money and this encourages regular savings. Those Members who borrow from the Credit Union pay interest for use of the money. Interest earned from loans is the Credit Union's main source of income. It covers:

  • the dividend (i.e. interest) paid to shareholders (i.e. savers)
  • the Credit Union's operating expenses
  • reserves for financial stability Once the expenses of a Credit Union are met, any additional income is returned to Members in the form of extra benefits. Traditionally these have included:
  • higher returns on savings
  • lower interest rates on loans
  • no fees and charges
  • enhanced member services
  • education programmes on the wise use of money

How are Credit Unions different from banks?

Like Credit Unions, banks accept deposits and make loans-but unlike credit unions, they are in business to make a profit. They are owned by individuals and groups of shareholders who seek to maximise the return on their investment even though they may not be customers of the bank.

What is unique about Credit Unions?

Credit Unions operate through a set of principles founded in the philosophy of cooperation and the values of equality, equity and mutual self-help. Unlike other financial institutions, these principles focus on both the social and economic well-being of their members and the communities they serve.

Who owns a Credit Union?

Each Member of a Credit Union is an equal owner having one vote on decisions regardless of their savings or borrowings.

Who runs a Credit Union?

The Credit Union is run by an unpaid Board of Directors elected by the Members and voluntary committees. The Board can in turn employ Management and Staff.

Can I become involved in running a Credit Union?

Every Member has an equal say in running the Credit Union by making their views known at AGM and seeking election to the Board of Directors. Members can also put themselves forward as volunteers to carry out the other essential tasks of running the Credit Union. A wide variety of skills are required and welcomed.

What can a credit union do for you?

Your credit union can help you achieve financial independence through regular savings and fair and affordable access to loans.

Harp and Crown Credit Union Ltd are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Firm Reference Number (FRN) 577113. For details visit http://www.fca.org.uk

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