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.
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.
Any person who shares the common bond, pays the membership fee (£5) and fulfills the money laundering provisions in relation to proof of identity and residence when opening an account. Although it is possible to hold a juvenile account (Junior account) a person must be over the age of 18 to become a full voting Member and have the ability to borrow.
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
competitive rates on loans
no fees and charges
enhanced member services
education programmes on the wise use of money
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.
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.
Each Member of a Credit Union is an equal owner having one vote on decisions regardless of their savings or borrowings.
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.
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.
Your credit union can help you achieve financial independence through regular savings and fair and affordable access to loans.
