UK-wide credit union launches with table-topping savings rates

Credit unions are non-profit organisations, which typically offer savings products and loans. They're traditionally based in local communities, or among those in the same job. (See our Credit Unions guide to find out more.)

But the new My Community Bank claims to be the first nationwide credit union. It's open to anyone who supports the "culture, cuisine, finance or welfare of the South Asian community in the UK", as well as anyone living or working in the London borough of Brent.

While the criteria for joining is broad, the credit union says it will mark its users' support of the South Asian community in the UK by making an annual donation on behalf of all its members to the British Asian Trust, a charity set up by the Prince of Wales.

My Community Bank's launch came as MoneySavingExpert.com creator Martin Lewis spoke at a London Mutual Credit Union event this morning. He called for parliamentarians to set an example and to hit back at the growth of scourge of payday lending across the UK by encouraging and joining credit unions themselves.

If more people join credit unions, the extra income they earn can be lent back out to the community as affordable loans, stopping the need for many to resort to high-cost credit (see the Finally! Government to cap costs of payday loans MSE News story).

Is it worth joining?

One of My Community Bank's draws compared to mainstream banks and building societies is that its one-year savings bond offers 2.15% AER. This is streets ahead of the top mainstream bank, Virgin Money, which currently offers 1.91% AER if you lock away your cash for a year.

The credit union's three-year fixed savings account is also table-topping, offering 2.75% AER, compared to the next best three-year deal at 2.65% AER from Shawbrook Bank.

All credit unions have the same Financial Services Compensation Scheme protection for your savings as high street banks, so your money's also protected up to £85,000 per financial institution if something goes wrong.

But you can't invest more than £15,000 in any of My Community Bank's accounts. See our Top Savings Accounts guide for a detailed analysis of our best buys.

'Community savings and borrowing'

My Community Bank also says its loans, which will be offered for between six and 36 months, will be available "in the next couple of weeks". You'll be able to borrow between £500 and £3,000 at a rate of 26.8% APR, and even those with a poorer credit score should be eligible.

But while these loans are much cheaper than payday loans, you can borrow between £500 and £3,000 for less elsewhere – although you will need a decent credit score to do so. See our Cheap Loans guide for the best buys.

Chief executive Mohsin Mehdi says: "As a community bank, we are all about community savings, community borrowing, ethical banking and community prosperity.

"We will offer highly competitive savings products, and we stand shoulder-to-shoulder with the Archbishop of Canterbury in his campaign to rid the UK of payday lenders with our fairly priced and responsible loans."