Credit unions - Fact vs Fiction: Setting the record straight

As the cost of living crisis in the UK continues, thousands of people are turning to credit unions to borrow and save money. 

The team at My Community Finance share the most common misconceptions surrounding credit unions and the truth behind them. 

Fiction: Credit unions aren't as safe as banks. 
Fact: Credit unions are regulated by the Financial Conduct Authority and the Prudential Regulation Authority, meaning you can be confident your savings are protected up to £85,000 via the FSCS scheme. 

Fiction: To join a credit union, you must be employed in a specific profession.
Fact: Credit unions require their members to have something in common, but this can cover a range of criteria; e.g. living or working in the same area, working in similar industries, or belonging to the same church, trade union or other association. 

Fiction: Credit unions are charities.
Fact: It’s true that credit unions are not-for-profit organisations, but they’re not charities. The money credit unions make is used to provide better rates for their savers and borrowers or re-invested back into the union to improve their services further and increase the number of people they can support.

Fiction: Credit union rates aren’t as good as high street banks.
Fact: Because credit unions are not-for-profit organisations, they can provide some of the most competitive rates in the market. This includes higher interest rates for savers and relatively low-interest rates for borrowers, particularly for those who struggle to access traditional credit. 

Fiction: There are only a small number of credit unions in the UK. 
Fact: There are more than 250 credit unions across the UK, some with thousands of members. There are also over 87,000 credit unions globally in over 118 countries, serving over 393 million members and overseeing over $3.4 trillion in assets. In the US credit unions make up 30-40% of all lending.

Fiction: Credit unions are only for people with a poor credit history. 
Fact: It doesn’t matter what your credit history is like to become a saver with a credit union, and because they often have more flexible lending criteria than banks, credit unions can help borrowers with various credit scores, including those who may have trouble obtaining credit from traditional sources. 

Fiction: You can only borrow small sums of money from a credit union. 
Fact: The maximum amount that can be borrowed from a credit union will vary, but in some cases, customers may be able to borrow up to £25,000. The exact amount depends on your personal circumstances. 

Founder and CEO of My Community Finance, Tobias Gruber, said:

“Some argue credit unions are the UK's best-kept financial secret; they’re commonly misunderstood. But in reality, credit unions are a great ethical way for people to get higher interest rates on their savings and lower rates of interest on their borrowing.

"The finance industry has taken advantage of people for too long. The cost of living crisis has put household finances in the spotlight, and the nation is rightly demanding better. I believe credit unions are growing in popularity because they put people first - not profits”. 

About Tobias Gruber

Tobias Gruber is the founder and CEO of My Community Finance. For the past 30 years, he's been a prominent leader in investment banking and asset management for some of the sector's most renowned banks, including Credit Suisse, SwissBank, JP Morgan and Morgan Stanley. 
 
Fast forward to 2018, Tobias launched My Community Finance to provide a platform for the financially excluded, helping people to get back on their feet with ethical and socially responsible lending. Within 36 months, My Community Finance has become accountable for 25% of borrowing within the credit union sector. 
 
Tobias has experienced first-hand how certain areas of the finance world are ripe for change and is a passionate advocate for using fintech to help people and solve society's economic problems. 

About My Community Finance

My Community Finance is on a mission to transform how its customers manage their money by giving them access to ethical alternatives through two of the U.K.'s biggest credit unions: My Community Bank and Castle Community Bank.

Credit unions give a lifeline to customers who struggle to access mainstream credit by introducing them to financial communities that don't prioritise profits and whose unique regulatory structure means they can offer fairer rates. 

Based in London and launched in 2018, My Community Finance is fully authorised and regulated by the Financial Conduct Authority and is a trading name of Amplifi Capital (U.K.) Limited, which has offered ethical and responsible financial products to near-prime consumers since 2015.