Credit unions in Ireland explained

Credit unions provide a range of financial services, like mortgage loans and savings accounts, but there’s often some confusion about how they actually work. What is a credit union, and who can join? Is the credit union a bank? 

On this page, we’ll provide a definition of credit unions, exploring how they work, the typical interest rates, and the process of becoming a member. We’ll also offer a comparison to help you decide whether saving with a credit union or a bank is the better choice for you.

The definition of a credit union can vary by country, as they come in different forms around the world. In general, however, a credit union is a type of financial co-operative where people save and borrow money at fair rates of interest.

Unlike traditional banks, credit unions in Ireland operate on a not-for-profit basis and are owned by their members, who share a common bond, such as a community or profession. Members have equal voting rights, regardless of their account balance, and elect a board of directors to manage the credit union.

In Ireland, credit unions are regulated by the Central Bank of Ireland, which ensures that they are financially stable, in a process known as prudential supervision. The Central Bank also checks that members are treated fairly.

Credit unions offer many of the same financial products as banks, such as savings accounts and loans, but with the added benefit of being tailored to the specific needs of their members.

When you join a credit union in Ireland, you start by saving money, which contributes to a common pool of funds. This pooled money is then used to provide loans to other members. The interest charged on these loans generates income for the credit union. 

Any extra savings that are not immediately needed for loans can be invested to earn additional income. This income helps cover the credit union’s operating expenses.

Credit union savings are typically held in share accounts, where each share is worth €1 (or £1 in Northern Ireland). Unlike traditional savings accounts, you won’t find tables of credit union interest rates. Instead, they offer a dividend at the end of their financial year, based on the credit union’s overall financial performance. And the more shares you have, the larger your dividend will be.

While you can usually withdraw your money from a credit union bank account as needed, you might need to maintain a minimum balance if you have an outstanding loan. 

As we’ve seen, the main differences between banks and credit unions in Ireland involve their ownership, profit status, and the way they serve their members. But what are credit unions known for, and what makes them stand out?

We’ve broken down each aspect to look at the main differences:

• Customers vs. members: Banks are either privately owned or publicly traded institutions focused on generating profits for their shareholders. Customers of banks do not have ownership stakes or voting rights. In contrast, credit unions operate as member-owned cooperatives. When you join a credit union, you become a part-owner with voting rights, allowing you to have a direct say in how the credit union is managed and the direction it takes.

• Profit motives: Because their primary goal is to deliver financial returns to investors, banks offer products and services to that end. Credit unions, being not-for-profit, prioritise serving their members. Any excess income they make is returned to members in the form of dividends, better interest rates, or improved services.

• Personal touch: Credit unions are known for their personalised, community-oriented service. Unlike banks that are increasingly automated and closing branches, credit unions often maintain local branches throughout Ireland, providing face-to-face interactions and a strong personal connection with their members.

• Services: Credit unions offer more flexible loan repayment terms compared to banks. They allow for early repayment without penalties and are more willing to adjust loan terms if a member’s financial situation changes.

• Governance: Credit unions are governed by a board of directors elected by their members. These directors serve on a voluntary basis. In contrast, banks have a board of directors that is usually appointed and compensated.

In Ireland, credit unions typically impose savings limits, which can range from €10,000 to €100,000, depending on the credit union. These limits can change in response to Central Bank of Ireland regulations or economic factors.

For the most accurate and current information, it’s usually best to check with your individual credit union.

Yes, your money is safe in a credit union. In some cases, the credit union sets a savings limit of €100,000 per member. This amount is in line with the coverage provided by the Deposit Guarantee Scheme administered by the Central Bank of Ireland. This scheme is designed to protect depositors if a bank, building society, or credit union goes out of business. Up to €100,000 of your deposits in a credit union are safeguarded.

Joining a credit union in Ireland involves more than just opening an account like you would at a bank. To become a member, you must first meet the credit union’s “common bond”, which is a characteristic or affiliation that connects members.

Typically, this means you need to live or work in a specific area, or be employed by a company that has its own credit union for employees. Some credit unions focus on local communities, while others may have a common bond based on your job, employer, or membership in a particular organisation.

This shared connection helps foster trust and build relationships among members.

You generally need to provide the following documents to join a credit union in Ireland:

• A valid ID: This could be a passport or a driving licence.

• Proof of address: This could be a recent utility bill or bank statement.

• Proof of PPS number: This might include a medical card, a letter from Revenue or Social Welfare, a payslip, or a P60.

For detailed information on joining, and to check if you meet the membership requirements, you can contact your local credit union directly.

According to recent data from the Irish League of Credit Unions (ILCU), there are 400 credit union branches across Ireland, supported by 3,000 staff and 3,000 volunteers. To find a credit union near you, you can use the online credit union locator tool.

If there is any money left in a credit union savings account after someone has passed away, this remaining balance becomes part of their estate. The estate is essentially all the assets and belongings the deceased person owned. How these savings are distributed depends on two main factors:

1. The will: If the deceased left a will, the funds from the Credit Union account will be distributed according to their instructions.

2. Succession laws: If there is no will, or if the will does not cover the entire estate, the remaining balance will be distributed according to the laws of succession. Inheritance laws in Ireland generally prioritise close relatives like spouses, children, or parents.

While there isn’t a one-size-fits-all answer for whether you should choose a bank or a credit union, comparing their features side-by-side can be useful. The table below highlights key factors that can help you make your decision:

If getting a good return on your savings is a top priority, you might consider using a comparison table to compare current rates. That way, you can see what you might earn in a savings account and then compare that against typical credit union interest rates on savings (dividends). Raisin Bank offers accounts with fixed terms or easy access to suit your needs.

You might be able to get a higher return on your savings by looking beyond credit unions. At Raisin Bank, you can currently take advantage of competitive rates on fixed term deposits. It’s easy to get started. Simply register for a free Raisin Account, open a savings account, and deposit your funds.