When you’re frequently bombarded with major bank credit card ads, it’s easy to overlook credit cards at a local credit union. These nonprofits typically require membership based on location or affiliation with an employer, family member, or organization. Major credit card issuers generally do not have these requirements.
But while the rewards and benefits are often more obvious on bank-issued credit cards, credit union credit cards can offer generous own incentives or other forms of value. Additionally, a credit union provides many of the same services as banks, but the profits flow back to members in the form of reduced fees, lower interest rates, and more.
Here are a few ways credit union credit cards can eclipse glitzy bank offers.
It is not uncommon to find credit cards at a credit union with lower annual fees, balance transfer fees, cash advance fees, late fees, etc. In fact, the average late fee is about $ 10 cheaper at a credit union than at a bank, according to a Credit Union National Association Membership Benefits report. The types of charges assessed vary by credit union.
The Navy Federal Credit Union in Virginia, for example, has a military orientation and fees tailored to the lifestyle of its members.
“We know a lot of our military is stationed overseas, so not having any foreign transaction fees on any of our credit cards, we think, is a really fantastic way to be able to serve our community,” said Justin Zeidman, Credit Manager. card products at checkout.
Fees are an important factor to consider when choosing a credit card from any institution.
LOWER INTEREST RATES
If you keep a balance on a credit card for a long time, you can potentially save more money on interest with a credit card from a credit union than from a bank. This is because, unlike banks, the interest rates of federally chartered credit unions are capped. Federal law caps the interest rate on loans and credit cards at 15%. However, the National Credit Union Administration Board temporarily increased it to 18% and recently voted to maintain that rate until March 10, 2023.
As of March 2021, the national average interest rate for a credit union credit card is 10.97% compared to 12.55% in banks, according to the NCUA.
POTENTIALLY HEALTHY REWARDS
Some credit union credit cards compete with the signup bonuses or ongoing rewards rates that are found at major banks. This is one of the ways that these non-profit institutions give back value to their members.
For Keenan Kimbrough, a 27-year-old resident of Pennsylvania, the rewards and low interest rates were worth switching from a bank-issued credit card to a credit union card. His credit union card gets a 12% lower interest rate than the old card’s 22%, and the credit union card earns high rewards in common spending categories.
When redeeming rewards, “I can get $ 40 or $ 50” in cash back, Kimbrough says. “It was a good shot.”
MORE FLEXIBLE OPTIONS TO ACCESS CREDIT
When your credit is less than ideal and you don’t have enough money for a security deposit on a secured credit card, a credit union may offer you alternatives to create credit. For example, USAlliance Financial, a New York-based credit union, is one of a number of credit unions that offer a credit loan as an alternative to members who cannot pay a minimum deposit up front to qualify. a secured credit card.
“More than half, about 53%, of members are in credit unions that provide loans to credit builders who help people build credit,” says Jordan van Rijn, senior economist for the Credit Union National Association.
With this type of loan, the borrowed amount is held in a bank account while you make small incremental payments over the life of the loan. At USAlliance Financial, the lowest payment with a credit loan can be around $ 4.2 per month, compared to a minimum initial cost of $ 250 for a secured credit card. At the end of the loan, the funds are returned to you and can be applied to a secured credit card deposit to continue building credit.
ACCESS TO RESOURCES
Credit unions typically provide members with access to resources when it comes to managing a credit card or spending.
“Financial education and financial literacy programs are extremely common in credit unions, that’s a big part of what they do,” says van Rijn. “We have data showing that 83% of credit union members are in credit unions that offer financial education classes.”
Resources are available in the form of online educational tools, seminars, or partnerships with organizations that offer credit counseling or financial planning services. Offers vary by credit union.