Last reviewed January 2026
A credit union is a not-for-profit co-operative, providing loans and savings accounts to its members.
Their three main aims are:
- To provide loans at low interest rates
- To encourage regular saving
- To provide financial support and assistance to members and the community
British credit union membership has reached an all-time high of 1.52 million people (including junior members), according to the Bank of England's 2024 annual statistics. Internationally, there are over 400 million credit union members worldwide.
How do credit unions work?
Credit unions are member-owned financial institutions. Meaning that when someone becomes a member, they also become a 'shareholder'.
Members are required to save. Savings are 'pooled' and lent to members as loans.
As a member of a credit union, individuals have a voice and can vote on key decisions during their Annual General Meetings, where the Board of Directors and members can reflect on the year and decide on important matters. Crucially, this is based on a one member, one vote system.
Who can join a credit union?
Membership is open to anyone as long as they share a 'common bond'. Common bond simply means 'sharing something in common' and requirements are specific to each credit union. Typically they include living in a specific area, working for a particular employer, or being part of a particular organisation or community group.
How is a credit union different to a bank?
Although similar, credit unions and banks are not the same. Understanding the difference between the two could help you make a better financial decision for you.
| Credit union | Bank | |
|---|---|---|
| Ownership | Member-owned, not-for-profit | Shareholder-owned |
| Who can join | Common bond required | Anyone (most accounts) |
| Savings return | Annual dividend (not guarenteed). Some credit unions may also have savings product which pays interest | Fixed or variable interest rate |
| Loan rate cap | 42.6% APR maximum in England, Scotland and Wales.12.68% APR in Northern Ireland | No cap. Set by lender and often influenced by the Bank of England |
| Hidden charges | None on most products | Varies by lender |
| Free loan insurance | Often included | Rarely included |
| FSCS protection | Yes, up to £120,000 | Yes, up to £120,000 |
What are the benefits of joining a credit union?
- Non-profit organisations dedicated to benefiting their members and the community
- They are responsible and ethical lenders that provide financial education to their members
- Often offer better interest rates on loans, with interest rates capped by the government
- Encourage members to save as they borrow, ensuring they build a savings safety net
- Members receive a share of the profit in the form of an annual dividend
- Many provide free life insurance for loans and savings
- Savings protected up to a total of £120,000 by the Financial Services Compensation Scheme (FSCS). This is the same cover that you receive from a bank, building society or other financial institution
- Regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA)
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