Credit union accounts

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Just read this:

http://www.guardian.co.uk/money/2009/jan/10/cred-union-current-accounts

Credit union current accounts were introduced in 2007, and the rollout is being supported financially by the government.

In the present climate, many people will probably find the idea of belonging to a credit union quite appealing. They are not controlled by City shareholders and they don't gamble with their customers' cash on the international money markets - they are financial co-operatives owned and run by their members that can help the less well-off get affordable credit and provide a trusted place for people to save in their local community.
Unlike most basic bank accounts, credit union current accounts offer a debit card that can be used in shops and to withdraw money from ATMs. Account holders can also set up standing orders and direct debits, which can save money when paying utility bills. But be aware that you won't get a cheque book and there is no overdraft facility - though at least that means account holders cannot incur charges for going overdrawn.
The good news is that credit unions are covered by the Financial Services Compensation Scheme, so the first £50,000 of your cash is completely protected. What is more, the scheme has a very good record of processing credit union claims quickly. In some cases, customers of credit unions that went under have got their money back within a few days.

Also, credit unions currently pay their members "dividends" rather than interest on their savings, but the government says it will allow them to pay interest, which will make it easier for people to compare the returns offered by different institutions.

ahai1

As I have stated before my local credit union charges for BACS about £2 a go so it is not right for a lot of people who regularly move money around from one account to another.

I do have questions about lending to people who are rejected by banks as I think that a lot of them are a bad risk and I would be careful about how much money I put into the CU. This is also too rosey a picture as ethical banks and building socieites like the co-op are not that affected by the money markets.

I would not consider the credit union to part of my ethical savings. I just save £10 a month as I would not like to lose some of the things I have with the bank for example 24 hours access.

opinions4u

ahai1 wrote: »

ethical banks and building socieites like the co-op are not that affected by the money markets.

So Nationwide and Britannia don't raise around 30% of their funding from the money markets?

Small building societies have been forced in to mergers because of their reliance on the money markets.

That particular part of you comment is naive.

ahai1

I used the word that. I don't remember any of them been taken over by the government.

30% of bad debt is not that bad. There are a number of reasons for mergers one of them is that the benefits of been part of a larger organisation.

System

ahai1 wrote: »

...
I do have questions about lending to people who are rejected by banks as I think that a lot of them are a bad risk and I would be careful about how much money I put into the CU. This is also too rosey a picture as ethical banks and building socieites like the co-op are not that affected by the money markets.

Credit unions, just like banks, are underwritten by the government. This means that should it ever fail, your money is safe. Having close ties to my local CU I can tell you that the rules as just as stringent, if not more so than those of the banks.

ahai1

The money is safe up to £50,000 or else I would not have put it in there in the first place. Still lending to people of very low incomes is a risk.

withnell

Which credit unions pay decent rates to investors? I've had a look at a few websites and the rates all appear pretty poor - do the dividend payments make up for this?

If anyone can provide some examples with figures I'd be very grateful.

Milarky

13000 wrote: »

Credit unions, just like banks, are underwritten by the government. This means that should it ever fail, your money is safe. Having close ties to my local CU I can tell you that the rules as just as stringent, if not more so than those of the banks.

You'll get your money but they'll wind up the credit union. This is the bizarre feature of CUs (some might say their most endearing feature) No credit union can look to another credit union for assistance - e.g there no provision for the CU equivalent of Nationwide BS to 'rescue' a smaller CU in trouble with government blessing. There is just no provision* for the orderly rescue of CUs as there is with

i) banks
ii) building socieites

*There might be with this new 'general mutual' law which has just come it - which the Co-op 'Bank' is using to take over the Britannia BS but I haven't studied that...

So CUs will always be uniquely endangered IMO. The only govt 'solution' to this was to double the amount of interest they can charge borrowing members. Compare that to the way govt has strongarmed lenders to cut their rates (rather than increase their margins)

ahai1

Charging people to borrow more is a good idea so that savers can hopefully get more.

As for the CU's they would be less in danger if they were more professional.

System

withnell wrote: »

Which credit unions pay decent rates to investors? I've had a look at a few websites and the rates all appear pretty poor - do the dividend payments make up for this?

If anyone can provide some examples with figures I'd be very grateful.

It can vary widely. I put my money in there because after getting fed up with idiots like Barclays etc, but more a social justice type of thing.

Our credit union is hoping to declare a 2% dividend for example.