Credit unions hoping to widen net
It looks like a bank, and sounds like a bank, but is very different.
It is a busy afternoon at the London Community Credit Union branch in Hackney. People are coming in to take money out from their current accounts, to deposit savings, and to talk about loans.
Credit unions might offer similar services to banks and building societies, but they are financial co-operatives, meaning members get a say in how they are run.
At present only about 2% of the population are members, but changes to the law could boost their numbers.
Traditionally, the big attraction of credit unions can be the cheap loans. By law, credit unions have to keep interest rates on them low.
The way it works is simple. Members pay in savings, and then that money is used to fund the loans. Then once a year, members get to share the profits on the interest from those borrowings.
Traditionally that payment has been decided at the end of the year, so members have not known what kind of return they would get on their money.
The average is about 2%, but it all depends on how an individual credit union has performed. If it is done well, members get a bigger chunk of cash. But if not, they might not get anything extra.
Vernella Dyer has popped in to check on her balance at the credit union in Hackney. She has been a member here for just over a year.
"I save here because I feel it is very community-based. It is brilliant," she says.
As this branch is new, the members have voted to not take a payment but to build up their cash reserves.
Ms Dyer says she would have loved to have had the money, but thinks it is the correct decision.
"At the end of the day, I feel it would have been nice to have a payout, but I think they were thinking practically, thinking of the people in the community," she says.
Now though, the law has changed, so credit unions in England, Scotland and Wales can stop the uncertainty and offer fixed savings rates.
Mark Lyonette, chief executive of the Association of British Credit Unions Limited, says: "In terms of saving, for those people who are trying to make the most of their money, being able to know what rate your credit union is going to pay you is actually really important."
He thinks the biggest attraction is that savers will be able to compare credit union rates with other products on the market.
"Those people who are chasing the best rates cannot be certain at the moment that credit unions are going to give them the rate that they are looking for," says Mr Lyonette.
"Now, this is going to put us on a level playing field with other institutions in the UK."
The new law only came into force in January, so most credit unions have not set their interest rates yet. But one has already offered 4% on a cash Individual Savings Account (Isa).
David Braithwaite, financial adviser with Citrus Financial Management, thinks that is an attractive offer.
"The 4% rate is very very good, but is it a headline-grabbing rate?" he asks.
"To get that rate with other companies you are tying your money up with a traditional bank or building society account for up to four or five years."
And he sees a potential problem for credit unions trying to attract new customers.
"The downside is that a lot of people in this economic climate are looking for somewhere safe to put their money. Now there is nothing wrong with a credit union, but a lot of people do prefer a High Street brand, well known names that they can trust," he says.
In fact, credit unions are as safe as banks and building societies. Like them, the first £85,000 of a customer's savings is protected by Financial Services Compensation Scheme.
But most credit unions will not be offering guaranteed interest rates in the immediate future.
For a start, this is not an automatic change.
"Each credit union has a choice on whether or not it wants to offer the guaranteed interest rate. So they would have to vote on that procedure," says Jo Everest, community relations manager for the London Community Credit Union.
"For us here, it would be early next year before that came into effect."
Meanwhile Ms Dyer is hoping for a change.
"I personally would rather have interest coming in, and then I would know exactly what I am getting when I am banking my money," she says.