New legislation means your credit union will soon be able to handle all your day-to-day finances
Ireland’s credit unions, which have topped the CX Company’s annual customer experience survey for nine straight years, have filled a gaping financial hole in many towns and city suburbs following the departure of KBC and Ulster Bank from the Irish market and the widespread closure of branches by Bank of Ireland and AIB.
For decades, the low-key, not-for-profit institutions have followed a traditional path: money comes in from members’ savings and goes out in the form of loans.
But recently, more of the country’s 200 credit unions have been offering a slew of new products, from green loans and mortgages to current accounts.
This trend is poised to rapidly accelerate this year, thanks to new legislation that will enable these financial co-operatives to better compete with banks.
The biggest reform of the sector in 10 years will enable credit unions to co-operate with one another, thereby allowing smaller credit unions to refer members to a larger one for products they don’t offer.
Kevin Johnson, CEO of the Credit Union Development Association (CUDA), says: “For those living in areas where the local credit union is their nearest financial institution – or, indeed, the only financial institution – the new law will give them more scope to manage all of their day-to-day banking with their local credit union.”
Before you make 2024 the year you turn the credit union into your main ‘bank’, consider these factors:
With a collective 400 branches dotted across the country, credit unions now have more branches than Bank of Ireland, PTSB and AIB put together.
“They have more accessibility and more opening hours than any bank,” says Paul Walsh, a former Barclays banker who now runs Peopl Insurance, which sells insurance in partnership with CUDA credit unions.
The biggest reform of the sector in 10 years will enable credit unions to co-operate with one another
“It’s much easier to have a conversation with a credit union than any bank. If credit unions can do what they say they can do, they will win hands down over the pillar banks in 10 years.”
Most credit unions already offer current accounts.
These come with Mastercard debit cards (don’t expect to get a credit card), online banking, a mobile app, as well as contactless payments through Google Pay, Apple Pay and Fitbit Pay.
Some offer overdraft facilities, and will offer up to €5,000 if your salary is paid into your current account.
Members can use the mobile app to set up and manage direct debits, transfer funds, and apply for a loan.
However, don’t expect the app to resemble Revolut and if your local credit union doesn’t offer a current account, you’ll have to wait until it can act on the new legislation and refer you to a credit union that does offer the service.
The CurrentAccount.ie brand has a list of the credit unions that offer current accounts.
Current account maintenance fees are about €4 a month, which includes unlimited point-of-sale and contactless transactions, standing orders and direct debits, and five free ATM withdrawals a month.
The ATMs are provided by a third-party operator and there’s a fee of 50c for every ATM withdrawal after reaching the free withdrawal limit.
Credit unions offer some of the best value current accounts in the market.
For instance, AIB charges €4.50 a month for account maintenance fees, before extras such as 20c for using a debit card for purchases, 35c for cash withdrawals, and 20c for direct debits. Bank of Ireland’s quarterly fee is €18.
If credit unions can do what they say they can do, they will win hands down over the pillar banks in 10 years
PTSB customers are charged €6 a month for account maintenance but they can earn back 10c on each debit card transaction, up to a limit of €5, meaning account maintenance for regular debit card users is effectively only €1 a month.
Revolut’s standard plan doesn’t come with any fees, but for cash withdrawals, you’re limited to five cash withdrawals a month or up to €200.
While retail banks dominate new mortgage lending, your local credit union may offer you a much better mortgage rate. About half the country’s credit unions now offer mortgages, with some offering home loans on rates as low as 2.95pc.
“While the average mortgage interest rate across banks has increased significantly, it has actually decreased across the credit union sector,” Johnson says.
These low rates are driving up demand for credit union mortgages, with a 52pc jump in such lending in the year ended September 2023 (albeit from a small base), the Irish League of Credit Unions (ILCU) reported last month. The ILCU represents 92pc of the country’s active credit unions.
The new legislative changes will mean smaller credit unions that don’t offer mortgages will be able to refer members on to a larger credit union for one.
“This effectively means that every credit union in the country will be able to offer mortgages,” Johnson says.
Nomination of accounts
The credit union allows members to nominate the person who’ll inherit the funds in their accounts without the beneficiaries having to go through the drawn-out probate or intestacy processes.
The new law increases the amount you can leave to a beneficiary to €27,000 from €23,000 and improves the financial safeguards for those planning their estates by requiring signatures from two non-beneficiaries.
A glacial adaptation of digital technology meant many credit unions missed a trick when customers forced to leave KBC and Ulster Bank were searching for a new current account and found credit unions’ online and mobile banking offerings to be stuck in the dark ages.
Credit unions now have more branches than Bank of Ireland, PTSB and AIB put together
However, the pillar banks have suffered a similar fate and pulled the plug in November on plans to launch an instant payments app to rival Revolut. Greater co-operation between credit unions will allow them to improve their digital platforms.
“Credit unions are fully aware” of their digital challenges, Walsh says. “The worst thing for credit unions would be to rush into it. Credit unions are not going to repeat the mistakes of the banks by trying to do the tech themselves and will get expert partners instead.”
How traditional savings and loans are changing
For almost six decades, credit unions have enabled local and workplace communities to borrow from a communal pool of savings at a fair rate of interest, returning any surplus income to members in the form of a dividend or improved services.
Usually, the size of a loan you could get from your credit union was a multiple of the value of the shares (savings) you held, which meant you couldn’t access your savings if these shares were security on a loan. However, that is changing, a trend that will accelerate with the new legislation, Johnson says.
“With the traditional way of doing it, your first loan was equivalent to your savings and it became a multiple” of shares with further loans, he says. “That’s gone now. You may not even have savings in the credit union but if the loan is affordable to you, you can get it. Some credit unions are providing term deposit accounts and you might see more of that in (2024).”
While too few credit unions were offering overdrafts when people migrating from KBC and Ulster Bank were trying to find a new current account, more of them do so now. And the Credit Union Development Association has designed another type of revolving credit that it calls a ‘flexi-loan’.
“There are members who’ve come in and gotten a couple of loans,” Johnson says. “But instead of them going through the whole loan approval process each time, these well-known members would get a line of credit. One of the new things we’re also catering for is automation of approvals for borrowers with a good track record.”