Credit Unions are to begin offering customers basic banking services from next week, it has been announced.

Savers will be able to use the accounts to set up direct debits and standing orders, although there will be no overdraft facility.

The announcement was made by the Association of British Credit Unions Limited (Abcul), the credit union umbrella body.

"We can offer members a current account service similar to that offered by banks, but with all the added extras associated with a financial co-operative that is owned and run by its members, for the benefit of those members," said Mark Lyonette, Abcul chief executive.

And he claimed the step of offering basic banking services to credit union members "represents a major step forward in helping to meet the government's aim of eliminating financial exclusion".

A recent report from Credit Action found that consumers who do not have a bank account often end up paying more for their household bills.

This is because many firms offer a discount for payments made online or by direct debit and some also charge an administration fee for payments made by cash or cheque.

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