Credit Union Credit Cards A Good Alternative To Bank-Issued Cards
Credit union issued credit cards offer a lot of benefits to users that bank-issued cards don’t. These types of credit cards typically offer lower interest fees and charges compared to conventional credit cards. Since credit unions are not for profit organizations owned by members, they can afford to offer very competitive rates. According to a survey conducted by the Pew Charitable Trusts, the average interest rate of credit union credit cards range from 9.9% to 13.8%, compared to bank rates, which ranges from 12.2% to 17.9%.
By law, federally charted credit unions cannot impose interest fees higher than 15%, except under certain conditions. For now due to the weak business climate, that limit has been raised to 18%, which is still reasonable by today’s standards. Non-federal chartered credit unions on the other hand observe interest caps that are determined by their respective states, with most rate ceilings falling below 18% according to the Credit Union National Association.
Credit unions are also known to charge lower penalty fees and other rates. For example, banks on average charge cardholders $39 for late payments and over the limit spending, while credit union credit cardholders only pay $20 in penalty fees on average. Majority of banks also charge for balance transfer fees while only a quarter of registered credit unions do so. Cash advances on average cost anywhere from 20.2% to 21.2% for bank-issued credit cards compared to 10.2% to 13.8% for credit union credit cards. Lower penalty fees and rates are particularly helpful to individuals who carry balances on their credit cards.
And since credit unions generally have small operations, customers can get more personalized customer service. The downside of it is that they usually have limited hours not unlike banks which have dedicated customer service teams available 24 hours a day, 7 days a week.
One minor downside to owning credit union issued credit cards is rewards feature. Most if not all credit union credit cards do not earn rewards and so if you are looking at earning points for your purchases, you would be better off getting a bank-issued credit card. Also, unlike conventional credit cards, you need to acquire a share in a credit union before you can qualify for their credit cards. According to a study conducted by the Credit Union National Association, share value ranges anywhere from $5 to $50. Some credit unions charge credit card applicants a one-time joining fee. Fees could be as low as $1 to as high as $50.
