What Is a Credit Union?
Credit unions have been around for generations, but they're still a bit of a mystery to many people.
How did credit unions start? How are they different from banks? Who can join one? And what do they actually do with your money?
Here's a simple guide to how they work and why more than 2 million people across the UK are members.
In this guide
What is a credit union?
A credit union is a member-owned financial co-operative.
In simple terms, people join a credit union to save, borrow and access financial services, while also becoming a member and part-owner of the organisation.
Unlike a bank, which is generally owned by shareholders, a credit union is owned by its members.
Credit unions are not-for-profit organisations. They still need to make enough money to operate, invest in their services and remain financially strong, but their purpose is to serve their members rather than external shareholders.
And they're regulated financial organisations too. UK credit unions are authorised by the Prudential Regulation Authority and regulated by the Prudential Regulation Authority and Financial Conduct Authority, just like a bank.
Where did credit unions come from?
The idea behind credit unions began in Europe in the 19th century.
The first modern credit unions appeared in Germany in the 1850s, based on a simple idea: people could save together and make affordable credit available to members of their community.
The movement spread around the world.
In Britain, the first modern credit unions appeared in the 1960s, with early organisations established by communities including Caribbean immigrants who brought experience of credit unions with them.
Then, in 1979, the Credit Unions Act created a legal framework for credit unions in Great Britain.
Though Credit Union services have evolved since then, the basic idea hasn't changed much since those early days:
Save together. Borrow responsibly. Support each other.
How many people are members today?
Credit unions aren't a small corner of the financial world.
In the first quarter of 2026, more than 2.17 million adults were members of credit unions across the UK.
There were around 350 active credit unions, with the sector holding around £4.9 billion in assets.
That means millions of people are already choosing a financial organisation that is owned by its members.
What does a credit union do?
At its simplest, a credit union helps its members save and borrow. It can be somewhere you save, manage your money and build your financial future.
You can save
You can usually save regularly with a credit union and many will give you an “annual dividend.” This is your shareholder reward. After a year of lending and collecting interest, the credit union will redistribute this to members (the shareholders) as dividend on your savings.
Depending on the credit union, you may also find savings products designed for different needs.
Larger organisations like Plane Saver Credit Union offer Cash ISAs, Junior Savings, online banking, and more.
You can borrow
Credit unions offer loans to eligible members and they’re often more affordable than borrowing elsewhere.
Credit unions are subject to a legal limit on the interest they can charge on loans. The maximum is 3% per month on the reducing balance, equivalent to 42.6% APR.
Individual credit unions often offer rates below this maximum.
How is a credit union different from a bank?
The biggest difference comes down to ownership.
With a credit union, you're not just a customer. You're a member.
Credit unions are owned by their members, and the principle of one member, one vote means members have a say in how their organisation is run by voting at annual general meetings.
Now, this doesn't mean every credit union offers the same products, rates or services as every bank. It simply means the organisation has a different structure and purpose.
Who can join a credit union?
This is where it gets interesting.
You can't necessarily join any credit union you choose.
Credit unions have something called a common bond. This is the connection that makes someone eligible to become a member.
It could be based on:
Where you live
Where you work
Your employer
Your industry
An organisation or association you're part of
Your family connection to an existing member
Or a combination of the above
The rules are different for each credit union.
How do I join a credit union?
If you're interested in joining, the easiest way to find out whether you can join is to search using your postcode, employer or another connection.
Find your credit union today using the Find Your Credit Union service.
