Non-profit bank launched offering table-topping rates
A new not-for-profit bank has launched offering customers table-topping one and three-year fixed savings rates.
My Community Bank is a new national credit union, offering 2.15% on a one-year savings account and 2.75% on the three year alternative.
It says it was set up to offer an alternative to disillusioned savers stuck with miserly interest rates paid by high street banks.
It will also aim to provide affordable loans to people who would otherwise be forced to turn to payday lenders, such as QuickQuid and Wonga, where clients can get trapped by into a spiral of debt by cripplingly high interest rates.
Figures from My Community Bank show a £500 30-day loan from QuickQuid would cost £122.70 - equating to an 1,734% APR. The equivalent from Wonga would come at an APR of almost 6,000%.
In comparison, £500 borrowed from My Community Bank for the minimum six-month period but repaid early without penalty after 30 days would cost £11.01 in interest – an APR of 26.8%.
Mohsin Mehdi, chief executive of My Community Bank, describes the new institution as "an antidote to the addictive and expensive type of loan offered by payday lenders".
He adds: "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."
There are around 500 credit unions across the UK, with around a million members in total. They are set up by groups of members within a community of some sort – whether they live locally or belong to a particular industry or trade union.
My Community Bank is rooted in two such community bonds, with membership available to anyone who lives or works in the London borough of Brent, or who is involved with an association or charity promoting the welfare of the UK's south Asian community.
This article was written for our sister website Money Observer
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
This is used to compare interest rates for borrowing. It is the total (or “gross”) interest you’ll pay over the life of a loan, including charges and fees. For credit cards where interest is charged at more frequent intervals, the APR includes a “compounding” effect (paying interest on interest). So for a credit card charging 2% interest a month (equating to 24% a year), the APR would actually be 26.82%.