What Is A Credit Union?
In many ways credit unions are just like banks. We take deposits from people who have some spare money (savers) and lend this money to other people who need it (borrowers). We charge borrowers interest on their loan (the costs for using someone else’s money) and use this to pay the savers a dividend or interest on their savings (the reward for letting your money be used by others).
Both credit unions and banks aim to make money for their owners but this is where credit unions are different. Unlike banks, credit unions are owned by the people who save with them. This means that credit unions do not try to maximise the interest they charge or pay out* – instead they charge reasonable rates for borrowers and provide reasonable returns for savers.
*The credit union’s adult savers and borrowers own the business and are known as “Members”. Members don’t get interest on their savings but a dividend (which is a share of the Credit Union’s profits). Since under 18’s can’t be Members they get interest instead.
Another main difference from banks is that credit unions only serve people from a particular community (in the case of Scotwest that’s everyone who lives in the West of Scotland – hence the name!) The reason for this is to ensure that Credit Unions meet the needs of the local people who own the business.