Advantages of credit union?

Legacy_user · 16 June 2017 at 5:36PM

A guy at work who I respect showed me his credit union cash card, and said how you could access cash from it, I was a little dubious because it didn't sound much better than a debit card on a basic bank. I look up my local ones (won't say which) and they offer no interest, but have a prize draw, and I've read that some charge for an account, am I missing something? I could understand less fines perhaps for people who perpetually fail transactions or go overdrawn, so I assume this is like the complete opposite of a high street bank's reward account?

I look at the loan rates, one is 26%, the other is 40%, and you call the bank's money-grabbing, I'd be better off with credit cards - although maybe it's after the poor credit market, but it doesn't look like an organisation that "gives better rates because it's mutual". My colleague said how it's good that the interest was fixed, I suppose that's a bonus if you might take longer than contracted. If they are not for profit and charge that interest rate I assume that interest is to cover defaults and wages.

And isn't mutuality a building society thing? They have the same selling point?
I suppose their existence is a good thing because it offers extra competition and credit to those who might go payday, but advantages for the ordinary person? - I have poor credit (undeveloped) but I still managed to get a card and overdraft facility

antrobus · 16 June 2017 at 8:56PM

See;
http://www.moneysavingexpert.com/banking/credit-unions

Brewer20 · 17 June 2017 at 12:46AM

I'm in a credit union, mine pay a dividend at the end of the year dependant on savings, loans given etc for members. It's a good rate, last payout was 2%, try getting that from a bank over 12 months.

Also had an ISA with them although that was a little sketchy as to what the rate would be this term, I moved it, last payout on that also 2%

System · 17 June 2017 at 5:53AM

Sounds like a better offering than was available to me, I won't rule them out in case a better one comes along

I think we need some indication of what the dividend rate is going to be to make a comparison - nationwide gives 5% in its regular saver

Some of the loans I've seen only let you borrow up to the amount deposited, which to me seems pointless when you could use your own money, some offer more and some have unsecured loans but their rates are double digit where I've seen

jayII · 17 June 2017 at 6:20AM

Several bank accounts give a much better interest rate than 2%. NW Flexdirect for example gives 5% on up to £2,500 for a year. TSB gives a switching bonus plus £10 a month for the first year plus 3% ongoing interest.

See http://www.moneysavingexpert.com/banking/compare-best-bank-accounts

Credit unions are a great idea from a philanthropic perspective, but I wouldn't put all, or even the majority, of my savings in one.

System · 17 June 2017 at 7:37AM

I can only see the philanthropy if it's rates are convincingly better, maybe it's better loan wise than savings wise

Bank's are philanthropic since anyone can be a shareholder and shareholder profits get reinvested in economy

agrinnall · 17 June 2017 at 8:59AM

MatthewAinsworth wrote: »

I can only see the philanthropy if it's rates are convincingly better, maybe it's better loan wise than savings wise

Bank's are philanthropic since anyone can be a shareholder and shareholder profits get reinvested in economy

I think you have a misunderstanding of what philanthopy is.

https://en.wikipedia.org/wiki/Philanthropy

Anthorn · 17 June 2017 at 9:36AM

Brewer20 wrote: »

I'm in a credit union, mine pay a dividend at the end of the year dependant on savings, loans given etc for members. It's a good rate, last payout was 2%, try getting that from a bank over 12 months.

Also had an ISA with them although that was a little sketchy as to what the rate would be this term, I moved it, last payout on that also 2%

But don't bank on a dividend, pun not intended. The credit union I'm in has never paid a dividend and the reason put forward at the AGM say it's because they get more incoming savings than they grant outgoing loans so profit from loan interest is limited. From what I understand that's a common problem with some Credit Unions.

TheGardener · 17 June 2017 at 6:10PM

CUs are great if you can have a payroll deduction - I've used one for years for this and its my own 'Christmas' club money.
But no dividend and no interest - really what I'm doing is saving money in an organisation that helps out people worse off than me by providing small loans to folk who would otherwise have gone to the loan sharks/payday lenders. The forfeit of any return I view as a sort of 'charity' donation.

System · 17 June 2017 at 6:33PM

I reckon some credit cards, ie vanquis are philanthropic in lending to poor credit history people...

I don't take overall sympathy for adverse credit or debt generally - they could've lived within their means, they could've worked enough to pay it or would've found work if they really wanted it, they should've been reliable and they've betrayed their creditors trust. I respect my lenders for lending me money that I myself would value.

People can improve their credit rating with time and effort, they can qualify for cheap loans by earning that trust - they haven't earned that trust if they're too risky to be profitable

agrinnall · 17 June 2017 at 8:14PM

MatthewAinsworth wrote: »

I reckon some credit cards, ie vanquis are philanthropic in lending to poor credit history people...

You really don't understand philanthropy if you think that's why Vanquis allow sub-prime customers to have cards: it's actually because they know a proportion of those people will not pay off the full balance every month so they'll make a lot of money out of credit interest. Exactly as every other card issuer does, whoever their target market is.

Advantages of credit union?

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