Forget banks and join credit unions, middle-classes urged

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A Cabinet minister has urged middle-class savers and borrowers to cast aside their prejudices and join credit unions.

These non-profit organisations have long been regarded as the preserve of low-paid families who would otherwise struggle to obtain a mortgage or bank account.

But the Government wants to change that image. Iain Duncan Smith, the Work and Pensions Secretary, told The Telegraph: "Credit unions can offer some of the best rates on the market for loans and dividends for your savings. But saving with a credit union can provide more than a financial return, as you will be investing in your local community.

"While credit unions help many people on low incomes to build savings and access affordable loans, their services are open to all. I'd encourage everyone to look at the accounts credit unions have on offer."

Mr Duncan Smith himself joined the London Mutual Credit Union last month, while membership across the UK is growing at its fastest in a decade. Credit unions, which operate like mutuals in lending out members' money, expect to gain 20pc more members this year, compared with 8pc a year on average since 2004. The Department for Work and Pensions will invest £38m over the next two years in the union network.