If you’re frequently bombarded with ads for credit cards at major banks, 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. Large credit card issuers typically do not have these requirements.
But while the rewards and perks are often more noticeable on bank-issued credit cards, credit unions can offer generous incentives of their own or different values. Also, a credit union offers many of the same services as banks, but profits are returned to members in the form of reduced fees, lower interest rates, and more.
Here are some ways that credit union cards can dwarf dazzling offers from banks.
It is not uncommon to find credit cards with lower annual fees, balance transfer fees, cash advance fees, late fees, etc. at a credit union. In fact, the average late fee for a credit union is about $ 10 cheaper than a bank, according to a Credit Union National Association membership benefits report. The types of fees vary depending on the credit union.
For example, the Navy Federal Credit Union in Virginia has a military focus and fees that match the lifestyle of its members.
“We know that many of our military personnel are based overseas, so we think it’s a really fantastic way to serve our community if we don’t have overseas transaction fees on our credit cards.” says Justin Zeidman, director of credit card products at the credit union.
Fees are an important factor to consider when choosing a credit card with any institution.
Lower interest rates
If you have an extended period of credit on a credit card, a credit union credit card may save you more money in interest than one from a bank. Because unlike banks, the interest rates at federal credit unions are capped. Federal law limits the interest rate on loans and credit cards to 15%. However, the National Credit Union Administration Board temporarily increased it to 18% and recently voted to hold that rate through March 10, 2023.
In March 2021, the nationwide average interest rate on a credit union credit card is 10.97% versus 12.55% for banks, according to the NCUA.
Some credit union credit cards compete with the sign-up bonuses or ongoing premium rates of large banks. This is one of the ways these nonprofits are bringing value back to their members.
For Keenan Kimbrough, a 27-year-old Pennsylvania resident, the rewards and low interest rates were worth switching from a bank-issued credit card to a credit union card. Its credit union card receives a lower interest rate of 12% compared to the 22% on the old card and the credit union card brings in higher premiums in common expense categories.
When redeeming rewards, “I can get $ 40 or $ 50” in cashback, says Kimbrough. “It was a good move.”
More flexible options
to access credit
If your credit rating is not optimal and you do not have enough money to deposit on a secured credit card, a credit union can offer alternatives for building credit. For example, USAlliance Financial, a New York-based credit union, is one of many credit unions offering a home loan as an alternative to members who cannot make a minimum deposit to qualify for a secured credit card.
“Over half, about 53%, of the members are with credit unions that offer loans that help people build credit.” says Jordan van Rijn, senior economist for the Credit Union National Association.
With this type of loan, the amount borrowed is held in a bank account while you make small additional payments over the life of the loan. At USAlliance Financial, the lowest payment on a home loan can be around $ 42 per month, compared to the minimum upfront cost of $ 250 for a secured credit card. At the end of the loan, the money will be returned to you and can be used with a secured credit card deposit to continue borrowing.
Access to resources
Credit unions typically provide their members with access to resources when it comes to credit card management or spending.
“Financial education and training programs are very common with credit unions, that’s a big part of their job.” van Rijn says. “We have data that shows that 83% of credit union members are with credit unions that offer financial education courses.”
Resources are available in the form of online educational tools, seminars, or partnerships with organizations that provide credit counseling or financial planning services. The offers vary depending on the credit union.
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