Organisers of the community banks have pledged never to charge users for their services.

More than 17,000 employees working for Coventry City Council or one of its partner organisations are being reminded that they can join their own scheme and borrow money at a cheap rate.

Credit unions work by getting people who live or work in a certain area together to save money.

Once people have shown that they are trustworthy by regularly saving cash, they are allowed to borrow money at a cheaper rate.

John Ditchfield of the Coventry Co-operative Development Agency, which coordinates credit unions all over the city, said the rates were lower than those offered by the major banks.

The banks caused outrage last week when they announced they would be charging their customers for withdrawals from cash machines.

He said:

"A credit union by definition wouldn’t charge its membership because the people who run it are also its members.

"Banks are profit-making but any credit union profits are shared out as a dividend.

"We charge one per cent a month on the declining balance of a loan, which is an APR of 12.68 per cent."

Mr Ditchfield added that anyone who worked for the Coventry City Council could take advantage of the scheme for its employees, which has been running for eight years.

A new credit union covering Spon End, Earlsdon, Chapelfields, Canley, Tile Hill, Westwood Heath and Warwick University is to start offering its services later this spring.

Officials from the Financial Services Authority are to run the rule over the volunteers and officials who will be responsible for managing its affairs next month.

Plans are underway for a another credit union covering the north of Coventry, while a scheme in Willenhall has recently been extended to cover the east of the city.