Credit Union should I bother

redmel1621

Hi

I have been saving in my local Credit Union and had £300 saved which I had to withdraw due to moving house....Anyway I have about £60 in there at the moment and have been working my budget out as I want to start saving again, I automatically planned to put £10 a week away into the CU account but the only reason I initially opened the account was to get a cheap loan for my holiday (which I didn't go on) and I don't really want a loan at the moment.

I am now starting to question as to why I am thinking of saving in it again, would I be better opting for a mini cash isa and paying my £4o a month into that or maybe split it and put £20 in each just in case I need a loan at some point. I do't have much spare money so want to make the right choice.

What would you do????

Mel x

Milarky

If you pay tax then an ISA is a good place to start with any form of savings. The main thing is to open an instant access ISA on the assumption that you will be drawing out from time to time. You can only pay in a maximum amount of £3000 during the tax year (rising to £3600 next April) but that is not likely to cause you difficulties from the amounts you are managing.

The credit union will pay you relatively little interest (lowish rates on a small balance etc) but does allow you to borrow. They aren't cheap (can charge up to 2% per month these days) so you'd need to check with them the following sorts of details

1) What size of loan would your savings with them make you eligible for?

2) What is their rate of interest (annual) on such a loan

By keeping your account with them open you retain access to these privileges but at some point along the line you would be considered credit worthy enough to get a personal loan with a bank etc - which could be better value (lower rates). I emphasize 'could' however because banks offer widely differing rates to borrowers based on their creditworthiness. In principle a CU will only have a single rate for all their borrowers (which helps explain why they cost more in the first place)

Good luck

baby_boomer

The only [selfish] reason for saving with a credit union is to persuade them that you are able to pay off a future loan.

If you don't want a loan, their savings interest rates are a waste of time compared to the best savings accounts and every taxpayer who can save up to £3K cash pa should have it in an ISA.

redmel1621

Thank you for your replies.....

Hmmm
Still not sure then....is it worth opening an isa if I was only to save £20pm??

Mel x

Lazy_Runner

I suppose this depends on your budget.

If you can buy everything you need from within your income, and that would include saving for yearly expenses for example Christmas, birthdays, MOT, Car tax etc, then it looks like you wouldn't need a loan (probably). This obviously doesn't take into account emergencies. In this case, it would make sense to put the money in an ISA. You can get some mini cash isa's with pretty good rates, that have a minimum of £1, and you can put in any amounts. This would have the added benefit of building up your rainy day money so you wouldn't need an emergency loan from the CU.

If you can't buy everything you need, I suggest you get over to the DFW board and put up your SOA. You can get more details here:
http://forums.moneysavingexpert.com/showthread.html?t=107280
You will get advice about your situation and how to make savings, so that you will be in a better position to save.
But in this case, you may be better off keeping your CU account. If you need a loan in the future, it would depend on your credit rating. Again there is more information on the DFW board.

HTH

redmel1621

Thanks Lazy Runner

I might be best to keep the CU 'just in case' but I think I will open a Mini ISA and put most of my savings in there, although these savings would be used for Birthdays, Christmas. I mostly live within my means so have no major debts only a CC which I have spent about £50 on I have been in mega debt before and do not want to go there again.....hence trying to save...

Mel x

redmel1621

Thanks for your advice guys....

After thinking about it I have decided to get rid of the Credit Union Account and have opened an ISA with Natwest..

I re-read your messages and my own, it made me realise that I don't actually want a loan anyway I would much rather save for the things I need or stick any small emergencies on my cc which I could then pay off in a relatively short time.

I have joined up to some of the challenges on this site so hopefully will be able to put a lot more in the account each month

Thanks again
Mel x

fwor

Milarky wrote: »

They aren't cheap (can charge up to 2% per month these days) so...

Milarky - has this changed recently? Last time I looked they were only permitted to charge a maximum of 1% per month, which at the time was a pretty good rate considering the type of loan.

I keep a small amount saved with my local CU, not because I ever expect to take out a loan but because it seems to be a worthwhile cause if it reduces the amount of loan-sharking that goes on.

I was also interested to see a couple of months ago that a government review of CUs is under way, with a view to making it easier for them to pay competitive rates of interest and thus attract more savers. Who knows, we may get a new generation of savings institutions run "by the people for the people", which IMO would be a welcome move...

djbd1973

fwor wrote: »

Milarky - has this changed recently? Last time I looked they were only permitted to charge a maximum of 1% per month, which at the time was a pretty good rate considering the type of loan.

I keep a small amount saved with my local CU, not because I ever expect to take out a loan but because it seems to be a worthwhile cause if it reduces the amount of loan-sharking that goes on.

I was also interested to see a couple of months ago that a government review of CUs is under way, with a view to making it easier for them to pay competitive rates of interest and thus attract more savers. Who knows, we may get a new generation of savings institutions run "by the people for the people", which IMO would be a welcome move...

Another good thing with credit unions is that is good for helping those that have never saved to learn the principles of saving, and its relatively easy to join and the aspect of reducing the need of having to go to a loan shark is also good as previously suggested.