Most people don't realise that a credit union could be the best home for savings. But you'll need to meet certain criteria to get an account.
If you are an avid follower of the savings account best buy tables – and who isn’t? – then you’ll know that the top accounts often come from firms and organisations that aren’t exactly household names.
One perfect example is My Community Bank, which has launched a handful of savings bonds paying some pretty eye-catching rates.
But who is My Community Bank? And are these accounts as good as they look?
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How the deals compare
My Community Bank has launched a clutch of savings bonds. There’s a one-year bond paying 2.10%, a two-year bond paying 2.25% and a three-year bond which delivers a rate of 2.4%.
All of the accounts can be opened with as little as £1,000.
Those are all pretty stonking rates.
On one-year bonds, the nearest challenger is BLME which pays 2.05%, and even then you’d need to put down a minimum of £10,000.
My Community Bank also has the top deal on two-year bonds, level with Tandem Bank which also accepts deposits from £1,000.
On three-year bonds again My Community Bank is level with Tandem Bank.
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These deals aren’t for everyone
It’s worth noting here that not everybody is going to be able to get hold of these rates, as My Community Bank is not a mainstream bank – it’s a credit union.
As such, you need to meet certain criteria before you can open an account.
For example, you can open an account if you are a member of certain affiliated associations, which include the National Trust, Equity, the Prison Officers Association and the National Union of Journalists.
Alternatively, you will need to have a qualifying occupation – those that are classed as ‘minor’ by the Office for National Statistics, which includes the likes of retail managers, doctors, nurses, teachers, architects, secretaries and carers.
You can find a comprehensive list of the jobs that fall under this description on the My Community Bank website.
Finally, you may qualify if you share a household with a member of the credit union. So even if you work in a non-minor occupation, so long as your other half is a teacher or works in another qualifying job, you can still sign up.
Is my money safe with a credit union?
While a credit union isn’t a bank, you can rest assured that your money is offered the same protections if you want to save with one.
Credit unions are regulated by the Financial Conduct Authority and the Prudential Regulation Authority, while the money you save with them is covered by the Financial Services Compensation Scheme.
With the FSCS, the first £85,000 you save with any financial institution is completely protected should that firm go bust.
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How do they use my money?
When you put your money in a fixed bond with a bank or building society, that cash is then used to fund their lending activities.
The same is true of a credit union. My Community Bank, for example, offers personal loans of between £1,500 and £25,000, with interest rates ranging from 5.9% APR to 42.6% APR.
Credit unions have often been flagged up as useful alternatives to payday lenders.
Rather than seeing the vulnerable as an opportunity to make a massive profit, unions are more community focused so that’s another selling point to saving with one – you’ll be helping them support borrowers in need who might otherwise have to turn to less scrupulous lenders
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