Credit Unions

FROSTYFRECKLE

Hi,

I am so glad to hear that others use Credit Unions. Someone asked - sorry can't remember who (still new at posting threads) - what's difference between a Credit Union and the average bank, the answer is Credit Unions do not mess you around. As a shareholder with a Credit Union you have a say on how it is run. My Credit Union offers Current Account facilities with Visa Debit card and (I think) cheque books (I have always used debit card), mortgage facilities, special high interest savings accounts, and your more bog standard savings account. All loans, current accounts, and mortgages are subject to credit checks.

Credit Unions are not just for people with low income levels. My husband and I used to live in R of I for a while. Over there Credit Unions are just about on every street corner, before we left the banks wanted to limit what Credit Unions could offer. The banks could simply not compete with the Credit Unions (never found out what happened).

Does anyone know why Credit Unions are not talked and discussed more on MSE ?

Cheers to everyone :beer:

Milarky

Problems with credit unions as I see them:
- Membership is geographically or trade restricted; so if you want to join a 'good' one it's pot luck whether you would be eligible to do so.

- A 'dividend' is paid rather than interest (i.e. you are saving with them with no knowledge of what you will receive - even 'banks' manage to publicize what you will get) My credit union didn't pay a dividend last year, but didn't inform members this would be the case until the year in question had already passed - and they lost out on having their money on deposit in (say) the local building society. That's how a savings 'co-op' works: "In credit unions we trust, for everyone else please read the terms and conditions!"

- The cap on the cost of borrowing has actually been increased - by a 'Leebor' government - during a time of record low interest rates - from a cap of 1% per month (12.68 APR) during all the years of Mrs Thatcher and Nigel Lawson and mortgage rates at 15% - to 2% per month (26.82 APR) and I think Gordon Brown just put that change through as the Chancellor in late 2005 without a vote of any sort (i.e. on the 'QT') hoping no one would notice.

- Unlike building societies (never mind banks!) a credit union can easily 'fail' entirely and have to be wound up by a receiver when they hit a cash flow problem. In other words, credit unions are not able to bought out or rescued so as to continue as going concerns if they get into difficulty - a standard option in most businesses. In the last few years several credit union have gone belly up - so, paradoxically - they are actually more 'free market' disciplined than the giants of capitalism (like Barclays).

- When you borrow they don't offset your savings with them in working out the interest. This is a rum deal. Say you have £300 saved - and the dividend was 4% last year (and, you hope, next year too!) You borrow £800 for 12 months @ 1.25% per months (realistic figure based on the new cap of 2% per month) You make monthly repayments. 12 payments of £72.21 = £866.52 - 66.52 interest. In addition, you might get £12 on the divi.

But if you could have your (uncertain to earn any dividend) savings offset the loan, then its only £500 (net) that you'd owe. Yes, the £800 is given out and has to be repaid but you'd be better off too; Payments would be £68.96 instead, and the potential divi would now be just £2.96 - a NET improvement of £30. This is a profit to the credit union which you (the member) can't avoid - because they won't offset the value of your savings with them. They will make a 'superprofit' of approximately 12% on the value of money they already have as collateral (i.e. your £300) and is not, therefore lending on which they are taking any risk when you are borrowing a larger sum from them. (I'm assuming you agree not to withdraw any shares during the currency of your loan)

Best advice (based on experience) is to only consider joining an already successful (and longstanding) credit union. Some CU's seem to have grown from start ups too quickly and then hit problems (Google 'StreetCred')

It is not helped either by the lack of information on lending rates and dividend rates paid by all credit unions. They should be obliged to publish these as part of their company registration - it would after all be news to the boards of other credit unions to know this information (for the first time) on how they compare with all others.

FROSTYFRECKLE

Hi again,

Just read Milarky's thoughts about Credit Unions and yes, the one real draw back is the limitation to membership. Although the Credit Union I am with had a vote to open the Credit Union up - it was peviously limited to council workers, Fire Service and, Police Force. I am not aware of Credit Unions collapsing in Scotland and I cannnot say I have heard of them collapsing elsewhere in the UK - if a local Credit Union collapses it would be on the local news not national. However Credit Unions are meant to be a member of FSCS - which is the protection scheme given to savings of up to £35,000 if your bank, building society or Credit Union collapses. Credit Unions should be FSA registered and submit regular financial reports. Lastly, Credit Unions should carry insurance to protect against deliberate fraud by one of it's officers. Finally, Scotwest Credit Union (MY FAVE CREDIT UNION) does set off savings against loans should you wish - it's called a secured loan. I get the impression Credit Unions are at different stages of deveopment within the UK. I think it is a pity more is not discussed about Credit Unions as I do believe they can supply most of your financial needs and (to a degree) force you to live within your means - no overdraft, when applying for a loan they want to know your income AND expenditure.

maz1964

Hiya all

Im a big fan of the credit union, both myself and hubby are members and now setting up my daughter this week for savings only as under 18. I had started last year with a view to save and then clear any of my little debts along the way from their loans which have helped me tremendously. Felt more in charge for myself, guess it was the start of my LBM...lol

My union only charges 1% on the loan amount, the quicker you pay off the less you pay interest of course. Ive set ours up with weekly standing orders both of us and then our payments are split accordingly for each of our savings accounts and each of our loans.

Of course they do adhere to the money laundering guidelines, so although id had this bright idea to pay in my full months wages one week and try and get 4 times the amount for a loan which would have got me over 4000 i would have been able to clear about 6 of my debts in one go, wasnt really accepted. I do understand that i guess, but suppose would have to credit the savings account over a period of about 6 weeks larger deposits then go the larger loan.

Still all new but i think still worthwhile and i can see the savings going up and the loan coming down, gives you a sense of being in control and doing something more positive.

Id fully recommend it to all, go and check out your local one and go and have a chat, my union and all the members are really friendly and helpful.

Have fun
ciao for now MAZ

fkelanne

so which do u's all use?

jsmith9156

fkelanne wrote: »

so which do u's all use?

Voyager Alliance http://www.voyageralliance.com/

You need to be a Public Transport Employee eg. Train/Bus Driver to join

James

FROSTYFRECKLE

I use Scotwest Credit Union, open to ANYONE within the Strathclyde region