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Are Credit Union Credit Cards Better Than Ones From Banks?

What you'll learn: What are the benefits of a credit union credit card


Opening a credit card doesn’t mean you need to head to the bank to do so. The reality is that you can go to a credit union and open one. Since these financial institutions are non-profit and member-owned, you may get better rates and benefits than you would with a traditional bank. 

Let’s dig deeper into what benefits you may receive by opening a credit union card and whether it’s the right move for you.

What’s the difference between what credit unions offer vs. banks for credit cards?

Both bank and credit union card services require their customers or members to apply for a card — whether you get approved depends on factors such as your credit score. Both types of financial institutions offer different types of cards such as ones offering cash back rewards, low introductory interest rates, and free credit score monitoring tools. Some may charge an annual fee for cardholders, whereas plenty of others won’t.

The main difference between a credit union credit card is that it’s not coming from a big bank. Banks are for-profit, meaning they make decisions based on stockholders. Credit unions, however, are owned by their members, which means their decisions are in the best interest of their membership.

Cardholders of either financial institution are bound to similar obligations. For example, you need to make minimum payments after each statement period and agree to pay any fees and interest charges. However, credit union cards may require you to be a member of the credit union before being able to open one. Most banks won’t require you to open a bank account with them in order to open a credit card, but some might. 

What are some of the benefits of getting credit cards with credit unions?

Lower Interest Rates

Most credit union cards tend to have lower annual percentage rates (APRs) compared to cards issued by major banks. The Federal Credit Union Act has capped interest rates for credit union loans at 18% (unless the NCUA deems it necessary if lower rates threaten the organization’s safety). Banks, on the other hand, don’t have these sorts of limits. That means if you intend on carrying a balance on your credit cards, you’ll pay less in interest for a credit union card depending on your card’s APR.

Lower Fees

Since credit unions are nonprofits, proceeds tend to be used towards savings for their members. In other words, credit unions tend to charge both lower and fewer credit card fees than banks. Credit unions tend to charge fewer annual fees, compared to similar credit cards from banks.

Better Customer Service

Banks tend to have tens of millions of customers if not more — this could result in less personal service. Credit unions in contrast tend to have a smaller pool of members and are intended to serve a certain community. Since members vote for the people who manage the credit union, this system makes it easier for the organization to create products and services tailored for you. Plus, since credit unions tend to have fewer members you may receive better service. For example, the staff remembers who you are or there’s a shorter waiting time on the phone to have your questions answered.

Access to Military Benefits

There are credit unions like PenFed that cater to military members and their needs. Service members have the opportunity to enjoy member discounts on products, assistance with financial relief, exclusive information regarding deployment, and more.

While it’s true credit cards issued by banks may seem more convenient, don’t discount credit unions. As a member of a credit union, you get access to competitive rates, fees, and membership benefits. Plus, you will feel like part of a community. Although you may be required to become a member to apply for a card, many credit unions are more lenient in terms of their requirements — for example, PenFed lets anyone become a member even if they’re not a member of the military.

In any case, explore your options by comparing features from different credit cards before you apply.

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