The fair banking alternative: Ten differences between HEY Credit Union and banks

HERE TO HELP: Members of the HEY Credit Union team at the head office in Hull. From left John Smith, Matthew Stevens and colleagues Maya, Sherilee and Cathi

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Known as the fair banking alternative, HEY Credit Union has saved members £25m in interest charges since its launch in 1999.

Based in Hull and with branches across the Humber region, it has also returned £1.6m in dividends to members.

But what are the differences between Credit Unions and banks?

1.  Credit Unions are owned by those who use them. Savers and borrowers become member-owners. Usually with banks you are just another customer.

2.  Credit Unions exist to serve their members and improve financial well-being. Banks exist to make money for shareholders.

3.  Credit Unions are not-for-profit. They keep loan interest charges as low as possible because they only need to cover operating costs and pay a reasonable return to savers. They also have a legal interest rate cap. They don’t have external shareholders seeking big dividends, and there are no bankers’ bonuses.

4.  Credit Unions are co-operatives. Members can elect directors and make big decisions. Bank customers have no real say in how it operates.

5.  Credit Unions only lend what they feel the member can afford to repay. Loans can be as low as £100, with no penalties for early repayment. Banks don’t usually offer small personal loans and there is often a fee to settle early.

6.  Credit Unions are not just about lending – they promote and reward savings to help people build resilience for a rainy day. Seventy per cent of borrowers continue saving after the loan is paid off. Banks tend to promote saving and borrowing separately.

7.  Credit Unions focus on “people helping people”. Technology helps with administration but all loan applications are decided by a trained human underwriter. Calls and emails are dealt with by a person, not a machine. Banks may use credit scoring and automated decision-making, which could mean “the computer says no”. 

8.  Credit Unions educate people in the wise use of money. Services, which include workplace savings schemes, help members save safely and borrow affordably. Banks tend to focus on financial relationships and the generation of income from fees and add-on services.

9.  Credit Unions keep funds local. Any surplus goes to strengthen the business and develop better services or is returned to member-customers as a dividend on savings or a loan interest rebate. Bank profits usually go as a dividend to shareholders, who live anywhere in the country or even abroad.

10. Credit Unions have volunteer directors elected by and from the membership. They contribute skills, experience and time freely. Bank directors are usually appointed by shareholders to a paid role.

Credit Unions, like banks, are regulated by the Prudential Regulation Authority and the Financial Conduct Authority and deposits are protected by the Financial Services Compensation Scheme, so you can be sure your money is safe.

To find out more visit https://hullandeycu.co.uk/