Creditable Current Accounts With Credit Unions?

Credit unions have decided to offer current accounts to its customers. But what is a credit union - and are their new current accounts any good?

This week some of the country's biggest credit unions decided to offer current accounts to its customers. They're similar to the basic bank account that we wrote about recently where you can set up direct debits and standing orders, the account is free to run and you get a cashcard that gives you access to cash machines -- but you have to do without overdraft facilities and, usually, a chequebook and debit card.

Aimed at low-earners, credit unions are a bit like community-based versions of building societies. They're owned and controlled by their members and are run for the benefit of their members -- all of whom share a common bond such as living or working in the same area or in the same industry. So, unless you fit the relevant criteria you are not eligible to join one.

The idea is that members pool their savings together and these savings then provide funds from which small loans can be made -- in other words, credit union is a not-for-profit financial co-operative that is licensed to take deposits and grant loans at reasonable interest rates. It's a way of saving small amounts of money and being paid interest, and also of borrowing small amounts of money without being fleeced by loan-shark- style interest rates.

Anyway, some of the larger credit unions have now decided to start offering current accounts. So what are the benefits?

While basic bank accounts don't charge a monthly fee, a few of the new credit union current accounts will charge, on average, around £3 a month. But others, assuming you qualify to become a member, will be free to run. The main difference between a credit union bank account and a basic bank account is that you'll get a debit card with a credit union account, rather than a cash card that only allows you to use cash machines. That's a useful extra as long as you keep an eye on how you're spending your money when you shop.

Personally, I don't like current accounts that charge a monthly fee and, worryingly, the very small credit unions seem to go down the pan with alarming frequency.

But I am assured that the credit unions offering these new current accounts will come under the protection of the Financial Services Compensation Scheme , which means that, following a disaster, account holders will get most of their money back up to a limit of £35,000. What's more, as these current accounts are only being offered by the larger credit unions, the likelihood of problems is apparently small.

So if you like the idea of using a credit union to help you manage your finances then check out the Association of British Credit Unions Ltd (ABCUL) to see if there are any you're eligible to join.

> Check out the best Current Accounts