Credit Union 3.5% Interest - Query

cadboll

Hi!

My fiancee has money in a credit union account - she gets a rate of 3.5% tax free. She has about 10k in the account.

I'm recommending that she puts 3k into a cash ISA account, with a rate of about 5% Gross/AER. That leaves 7k! Is it beneficial for her to move the remainder into an online saver account, given that she gets 3.5% interest tax free in the existing account?

Thanks

grumbler

1. I am not an expert, but I am quite sure that interest on savings in credit uniouns is not tax-free for everybody. If she is a taxpayer, she must pay interest on all interest besides interest generated by ISA(s). If she isn't a taxpayer, she can get interest gross (tax-free) at any bank/BS. Possibly 3.5% she gets is not tax-free, but is after tax.

2. I think that the only point in keeping savings in a credit union is that this enables her to get a low-rate loan. If she is not going to take loan(s) this doesn't make any sense. She will be much better off by moving this balance to cash ISA(s) if she is a taxpayer, or to some other saving accout if she is not. She can move £3K into ISA now and another £3K in April.

ReportInvestor

grumbler wrote:

I think that the only point in keeping savings in a credit union is that this enables her to get a low-rate loan. If she is not going to take loan(s) this doesn't make any sense.

Totally agree. Go for the top rate accounts you can find on this site .

Credit Unions have merit. But not for savers.