Credit unions. What are they and how do they work?

Credit unions are becoming more and more popular as an alternative to the high street banks and expensive payday loans. But what exactly are they and how do they work?

The main difference between a high street bank and a credit union is that a credit union is a cooperative financial institution. This means that the people who use the credit union have a say in how it’s run rather than this being left to shareholders to decide.

There are lots of reasons why people are choosing credit unions over banks but here are a few of the main ones:

  • Having a poor credit rating or having difficulties opening an account with a high street bank
  • Supporting a local cooperative that doesn’t make a profit for shareholders
  • Having the flexibility to save what they can, when they want to
  • Credit unions may be more willing to help people on a low income or who don’t have a previous record of borrowing and they provide an alternative to payday loans