Credit Union(s). Are they any use???

steviebhoy_2

Does any one have any experience of using this type of financial mechanism??

I pay a regular monthly amount into one. Because I just realised just how financially flippant I've been over the years (raiding frequently), I'd like to know if they're worth using or do the banks and BS' win regarding savings (this one pays yearly dividend based on amount of "shares"(£'s)) and borrowings (renovating rather than moving should save £Ks???)

Any advice/anecdotes appreciated

steady__eddie

Welcome, I don't know what rate you're getting 'cos you don't mention it in your post but it is possible to achieve 7% (Stroud & Swindon) or 6% (Principality, Leek) for regular savings accounts with the mutuals or even higher if you are prepared to deal with the banking sector. Personally I prefer the former because there may be a pay off a few years down the line !
I was listening to a phone in yesterday morning on local radio (B.B.C. W.M.) and the caller was querying his membership of a Credit Union. Apparently the funds had been frozen for all of the members. No details were mentioned so wether there was liquidity crisis or the treasurer had decided to go to the World Cup a few weeks early, it is left to the listener to speculate ! I would presume that there must be a regulatory body to oversee these Unions but at least with the Banks and Bldg. Socs. you know that the first £2k and 90% of the following £30k is safe.

Milarky

I posted a thread on the 'vent' board about credit unions when I came across references to legislation being passed through on the nod to raise the lending 'cap' (what they can charge for borrowing) from 1% per calendar menth to 2%:

http://forums.moneysavingexpert.com/showthread.html?t=184255

Belonging as I do to a local credit union for the last few years I have been dismayed to realise that they charge the maximum and pay (basically) whatever they like. I've had dividends* of 2%,2%,3% and 2%. Also, the dividend is only paid 6 months after the end of the year for some reason.

*Credit unions use confusing terminology: 'shares' for savings and dividends for interest paid on savings. They aren't like the dividends paid by listed companies for instance.

As you will note I say in my posts that I can't see any justification for for allowing them to simply charge their borrowing members up to twice as much as now - especially given that they aren't required to pay any dividend at all. But since the previous cap had been there since 1979 - when inflation, mortgages and savings rates were all so much higher than today, I can't understand the logic. Supposedly they lend to people whom no one else will - or will only do so at unacceptable rates. Clearly they are pitching themselves against the doorstep lenders rather than the banks - whose unsecured lending is (all?) cheaper than 12% never mind 24%.

I may be wrong but I don't see this the way to go at all. If anything, the cap on lending rates should be brought down (possibly to 10%) and a requirement to pay a minimum dividend (of 2.5%?) rather than discretion to pay none at all. They are regulated by the FSA which means that CU money is as protected as those in banks. Yet they are being given a perverse incentive to try and be less competitive, if anything, with high street lenders.

Who are members of credit union? They are not at all as 'at the margins' as their out-of-step rates suggest.

The government is (sort of) getting around to introducing a 'matching-saving' account for low(ish) earners, but are taking years to get there. Now, if the people eligible for these accounts do not currently save with anyone then it is unlikely they would begin to start by saving with the likes of a CU rather than a bank. My solution then: In return for lending nearer-to-commercial rates, therefore, I would make credit unions as the vehicle for this matched-money approach. After all how else are they going to get their hands on any serious new money?

[Otherwise, I have finally found a way to make a few quid out of my CU on the side - but I'm not telling!]