Credit unions are are non-profit financial co-operatives which are owned, managed, and controlled wholly by their members.  They are locally-based and offer savings and loans to members of their community.  They operate local collection points staffed by volunteers where members can pay in money, arrange loans, or ask for advice.

Memberships are based on a Common Bond, which determines who may join a particular credit union.  These common bonds may be based on place of residence or work, members of a trade association or voluntary group, employees of a single company, or many other variations.

Unlike many high street savings accounts, or profit-based saving schemes, there is no minimum investment requirement, and members can save as much as they like, weekly, monthly, or as often as they wish.  Savers recieve an annual dividend which can be anywhere between 2-8% of their savings.

Life insurance is included at no cost to the member (subject to conditions), and this means that when a member dies, his or her savings could be as much as doubled by the insurance, and paid to whoever the member has stipulated as their beneficiary.

By law, credit unions cannot charge more than 1% on the remaing balance of a loan to a member.  There are no hidden charges, no penalties for paying off the loan early, and the life insurance that the credit unions provide ensures that should the member die, his or her debt will be paid off in full by the insurance.

Credit unions are active all over the world, and in many cases provide a much-needed resource for people who would otherwise suffer from financial exclusion, enabling local communities to operate a method of financial self-help that provides individuals with a means to save money and also to borrow money without being forced to turn to high-interest loan sharks.  Credit unions make it possible for everyone to save money, and even small amounts can soon mount up and gain both interest and dividends.

One of the objects of credit unions is to educate its members in the wise use of their money, in order to ensure that they are more able to manage their finances.

Credit unions are regulated by an act of parliament - the Credit Unions Act 1979 - which sets out the objects of credit unions, and how they must be audited and monitored by the Financial Services Authority.  This ensures that members will be compensated in the unlikely event of a union failing, and also that members may complain to the Financial Ombudsman in the same way that they would if they had a complaint about a high street bank or lender.

Want to find out more, or speak to a credit union in your area? Use the Association of British Credit Unions website to find your local credit union .