Community banks and savings and loans: when a credit union uses another name

A number of the financial names you will see on your high street or in local adverts are not banks at all. Several credit unions trade as a "community bank", and the "savings and loans" idea they evoke is exactly what credit unions have always done: members pool their savings and lend to each other at a fair and reasonable rate of interest¹. Legally, these firms remain credit unions: not-for-profit financial providers that help people access banking products like bank accounts, savings and loans².

The name matters less than the rules behind it. A credit union is not a bank and cannot offer overdrafts, mortgages, electronic banking services and payment methods or business loans in the same way as a bank³. What it can offer is affordable loans and savings to people who share a connection, with interest on loans capped by law at no more than 3% a month, an APR of 42.6%⁴, and savings protected by the Financial Services Compensation Scheme up to £120,000 per person⁵.

Why some credit unions call themselves a community bank or savings and loans

Credit unions are not-for-profit community lenders providing affordable loans and savings⁸, and building societies and credit unions are customer-owned financial institutions based in local communities across the UK⁹. The "community bank" name is a trading name that describes this local, member-owned model in words people recognise from ordinary banking. It does not change what the firm legally is.

Great Western Credit Union, for example, states plainly on its own site that it is a credit union, a member-owned financial co-operative, and not a bank or a building society¹⁰. That is the pattern across the sector: the trading name may say bank, the legal status says credit union. A credit union is a group of people connected by a common bond, based on the area they live in, the occupation they work in, or the employer they work for, who save together and lend to each other at a fair and reasonable rate of interest¹.

The "savings and loans" half of the name is equally accurate. A credit union is a self-help co-operative whose members pool their savings to let each other borrow money at a low rate of interest¹¹, and members' savings are used to fund loans to other credit-worthy members¹. All credit unions offer savings accounts and loans¹².

The practical difference from a bank is set out in a Northern Ireland Assembly research paper: a credit union is not a bank and cannot offer overdrafts, mortgages, electronic banking services and payment methods or business loans in the same way as a bank³. So a community bank credit union will usually offer a narrower range of services than a high street bank, but with a member-owned structure and a legal interest cap that banks do not have. The comparison page on credit union or bank sets the two side by side.

What a community bank credit union offers: savings and low-cost loans to members

A credit union provides loans, savings, bank accounts and other services to its members². Historically, credit unions offered simple savings and loan products to financially excluded individuals¹³, and they still aim to provide access to fair and affordable credit for people with a poor credit history, those who cannot access mainstream forms of credit, or those who may be unaware of affordable providers⁸.

The core offer has two halves:

• Savings. All credit unions offer savings accounts¹², and some also offer current accounts. With a credit union bank account you can usually, for free, pay in or take out cash at the credit union, have money paid in such as wages, benefits and pensions, use online, mobile or telephone banking, and get budgeting advice and support².
• Loans. All credit unions can lend small amounts of money for all purposes, and some can lend larger amounts over longer periods, for example to buy a car or for home improvements¹⁴.

Credit unions made over 650,000 loans to people on low incomes, saving them on average £401 a year compared with the cost of higher-credit alternatives¹⁵. The Welsh Government describes credit unions as not-for-profit community lenders providing affordable loans and savings, and notes they will only lend what you can afford¹⁶. The full range of products is covered in what credit unions offer.

Who can join: the common bond and the planned reform

Anyone can become a member in principle, but you must share a common bond with other members¹². All credit unions in the UK may only accept members who have a common bond¹³. MoneyHelper describes the typical bonds: living, working, studying or volunteering in a certain area, working in the same industry or for certain employers, or belonging to the same trade union². Other examples include working for the same employer or belonging to the same church or other association¹⁷.

The common bond extends to households. As long as one member of a family meets the common bond requirements and has joined the credit union, the other family members living at the same address can usually join¹⁴, and anyone in the house of a person with a common bond can usually join¹⁷. If a credit union's rules allow, it may have more than one common bond¹⁸.

A reform is planned. In March 2026 the UK Government said it would reform the common bond requirement to allow a credit union serving people living in the same area to cover a population of up to 10 million, up from the current cap of 3 million¹³. If implemented, that would let area-based credit unions, including those trading as community banks, serve much larger territories.

To join, you will normally be asked to pay a small fee, for example £2, or to save a certain amount such as £10². The pages on the common bond, how to join and finding a credit union you can join cover the detail.

Credit union loans and what they cost

Interest on credit union loans is capped by law: a credit union may charge no more than 3% a month, an APR of 42.6%⁴. Many credit union loans cost much less than the cap, with many charging 1% a month on the reducing balance of a loan, an APR of 12.7%⁴. Experian notes that credit union loans are significantly cheaper than payday loans or doorstep lending¹⁹.

How much you can borrow is usually tied to your savings. If you are a member of a credit union, you can usually borrow at least two or three times the amount you have in savings, depending on the credit union's loan policy²⁰. Advice NI describes the same idea: credit unions allow you to borrow at least twice more than you have saved once you have been a member for a certain length of time²¹. Some credit unions ask you to build savings first¹⁷, and Business Debtline notes that if you join and start saving, you can apply to borrow once you have proved you are a reliable saver²².

Two cautions are worth weighing. Interest rates on credit union loans are capped, but you might need to have a certain amount saved with the credit union before you can borrow². And Citizens Advice notes that credit union loans are often more expensive than personal loans from a bank or building society¹⁸, so the capped rate is a ceiling, not a guarantee of the cheapest deal for everyone. Credit unions can be a more affordable alternative to banks or expensive payday loans, sometimes offering cheaper loan rates²³, and they will only lend what you can afford¹⁶.

The pages on types of credit union loan, what a credit union loan costs and applying to borrow cover the mechanics, and credit union loans versus payday loans compares the two directly.

Savings earn interest or a dividend, and profits go back to members

Credit union savings accounts either pay interest or a share of any profits². Where profits are shared, the profit made by a credit union is shared evenly among savings accounts, and this is called a dividend, with some profit reinvested to improve services¹⁴. A dividend is possible when the credit union does well²⁴, so unlike bank interest it is not a fixed rate and is not guaranteed.

Some credit unions also choose to pay a loan interest rebate, which is a refund of loan interest paid to all members who borrowed during the preceding financial year¹. Great Western Credit Union describes where the money goes in a member-owned firm: profits are shared with members and the local community, not banker bonuses, advertising or shareholders¹⁰.

In practice this means a community bank credit union works differently from a bank in how returns reach you. A bank pays a set interest rate and distributes its profits to shareholders. A credit union either pays interest or returns profit to the people who save and borrow with it. Shelter Cymru notes that all the money you save with a credit union is covered by savings protection²⁵. The pages on credit union savings accounts and Christmas saving cover the account types.

Community savings banks are a separate proposal, not credit unions

Do not confuse a credit union trading as a community bank with the proposed regional mutual banks. Since 2019, the Community Savings Bank Association has led a campaign to introduce 19 regional mutual banks across the United Kingdom³. These would be new mutual banks, not credit unions under another name, and the Community Savings Bank Association suggests the investment capital necessary to establish one is approximately £20 million³.

Some of these organisations already exist on paper. Several proposed community savings banks have registered with the FCA under a mutual ownership model, including planned regional banks covering London, the South West, Avon, Wales and Northern Ireland³.

Both credit unions and mutual banks fall under the customer-owned umbrella, but a credit union is not a bank and cannot offer the same range of services³. Until any regional mutual bank is fully authorised and open, the community-owned option available in most local areas is a credit union: most local areas have one¹⁷. The comparison of credit unions and CDFIs explains how other community lenders differ again.

2.17 million members: the size of the UK credit union sector

Official Bank of England statistics show credit union adult membership continued to grow in 2026 Q1, increasing by 0.60% to 2.17 million members⁶. The sector's total assets grew by 0.33% quarter-on-quarter to £4.90 billion, total liquid assets rose by 3.35% to £1.33 billion, and interim profit grew by 61.09% to £17.95 million, driven by increases in England and Scotland⁶.

The recent growth follows a mixed period. Membership grew by 0.46% to 2.15 million in Q4 of 2024²⁷, rose by 0.80% to 2.29 million across 2025³⁰, grew 0.33% to 2.16 million in 2025 Q1²⁸, then declined by 0.84% to 2.16 million in 2025 Q3, the first quarterly fall since 2022 Q3²⁹. In 2024 Q1 there were 2,111,957 adult members, a 5.15% increase compared with the same quarter the year before²⁶.

The number of credit unions themselves is counted differently by different sources. Which? says there are more than 500 credit unions in Britain⁴, Experian puts the figure at around 450 across the UK¹⁹, and a credit union sector body says around 350, with more than two million adult members and combined assets of almost £5 billion²³. The differences reflect different dates and definitions, but all point the same way: there should be one in your area¹⁹. Find Your Credit Union reports more than 1.2 million members across England, Scotland and Wales alone¹².

Arrears are rising: what the sector figures show

The value of loans in arrears across the sector has grown steadily. The total value of net liabilities in arrears rose by 4.55% to £297.65 million in 2026 Q1⁶. Before that, it increased by 3.18% to £269.58 million in 2025 Q3²⁹, by 22.10% to £234.79 million across 2025³⁰, by 6.00% quarter-on-quarter to £213.56 million in 2024 Q3³¹, and by 11.01% quarter-on-quarter to £183.90 million in 2024 Q1, when the number of net liabilities in arrears increased by 1.67% to 79,224²⁶.

The 2024 annual figures show the same pressure over a full year: net liabilities of loans in arrears increased by 20.86%, with 48.02% of this total overdue by more than 12 months³². Over the same period, loans to members increased by 10.16% year-on-year, totalling £2.58 billion, total income rose by 28.81% to £418.18 million, total expenditure climbed 29.89% to £326.34 million, and post-tax profits rose 17.91% to £74.83 million³².

For a member, rising arrears are a sector-level signal rather than a reason to avoid credit unions: they reflect the fact that credit unions deliberately lend to people who may be refused credit elsewhere, including people with a poor credit history⁸. But they are also a reminder that a credit union loan is a real debt. If you fall behind, the page on falling behind on a credit union loan explains what happens, and free debt help is available from StepChange¹⁷ and National Debtline²⁰.

FSCS protection: up to £120,000 per person

Money saved with a UK credit union is protected by the Financial Services Compensation Scheme. FSCS protects up to £120,000 in total across all accounts you hold with the credit union⁵, and FSCS can pay back any money you hold with a failed credit union, up to its compensation limit of £120,000 per person⁵. The limit is the same as for banks and building societies: FSCS protection for banks, building societies and credit unions is up to £120,000 per person per banking licence³³, and FSCS automatically compensates eligible depositors up to £120,000 per eligible person, per bank, building society or credit union³⁴.

The limit applies per authorised firm, not per account or per trading name. If a credit union trades as a community bank, all the accounts you hold with that one credit union count together towards the single £120,000 limit⁵. MoneyHelper puts it simply: just like most banks, up to £120,000 per person is protected in a credit union account².

Credit unions across Great Britain and Northern Ireland are regulated by the Financial Conduct Authority and the Bank of England's Prudential Regulation Authority⁷. Key legislation includes the Credit Unions Act 1979, the Co-operative and Community Benefit Societies Act 2014, the Financial Services and Markets Act 2000 and the Financial Services and Markets Act 2023⁷. In the Republic of Ireland, registration and regulation of credit unions is undertaken by the Central Bank⁷.

If you are unsure whether a firm that calls itself a community bank is a credit union, a bank or something else, you can check its status on the FCA Register and check FSCS protection on the FSCS website. The general pages on consumer protection and scams and fraud cover where protection stops and how to spot a fake.