You may be considering getting a credit card from one of the credit unions as an alternative to obtaining a credit card from one of the major credit card issuing companies. Before you make the leap, it’s helpful to be informed about the differences between credit union credit cards and credit cards from major credit card issuers.
Advantages of Credit Union Credit Cards
A credit card from a credit union is issued by the credit union instead of a bank. Credit unions are nonprofit organizations that allow members to borrow from pooled deposits at lower interest rates. In contrast, major credit card issuing companies operate as commercial banks that always aim to take the interests of their shareholders into account when making decisions.
Lower Interest Rates
Credit union credit cards often have lower interest rates and fewer fees, and they can be more consumer-friendly than credit cards from major credit card issuers. For example, interest rates on credit union credit cards that are federally licensed are currently capped at 18%, which is lower than the current average credit card interest rate of 20.25%. There is no federal cap on the interest rates of credit cards from major credit card issuers. Instead, interest rates are set by the state laws where the company is licensed and based on market and competition. Of course, paying off your balance in full every month allows you to avoid paying interest, whether you have a credit union credit card or a credit card from a major issuer.
Better Customer Service
Being a member of a credit union may make it easier to get approved, even if your credit history is not in the best shape. Credit unions can be more lenient with members and may be more willing to give you a chance to build or rebuild your credit.
Disadvantages of Credit Union Credit Cards
You need to be a member of the credit union to apply for one of its credit cards. If you are interested in a specific card issued by a credit union you are not a member of, there may still be hope. Many credit unions offer multiple pathways to qualify for membership, including family membership, professional membership, or membership in nonprofit organizations. For example, you can join Consumers Credit Union and apply for the CCU Visa Signature Rewards Card by paying a $5 fee to the Consumers Cooperative Association.
Potential Risks to Other Accounts
Many credit unions include clauses in their credit card terms that allow the credit union access to funds in your credit union accounts if you default on your credit card. This is called “collateral assurance” and is somewhat similar to collateral on loans or deposits on a secured credit card. Credit cards with this feature must include prominent disclosures in their terms, as required by law. Review the card agreement before applying and determine if you are comfortable with this arrangement.
Otherwise, credit union credit cards are like any other credit cards. You can use them for purchases, balance transfers, and cash advances (if allowed by the card issuer). You’ll need to pay at least the minimum monthly amount on your balance to keep your account in good standing. Most credit unions will report your account history to credit bureaus, which is an additional incentive to make your payments on time.
What
You should look for it in the credit card of the credit union
Once you become a member of a credit union, you will have a range of credit cards to choose from. Sometimes, the opposite happens – you may seek to join a credit union so you can apply for a credit card you want. The card you ultimately choose depends on your current needs, but generally, you should look for a card with no annual fee and a low-interest rate.
If you wish to earn more rewards, choose a card that fits your spending habits. For long commutes or a lot of time on the road, the PenFed Platinum Rewards Visa Signature card pays 5 points for every dollar spent on gas and 3 points for every dollar spent on groceries. You will need to become a PenFed member, but everyone is eligible to join (you will need to open a shared account with a deposit of $5).
For balance transfers, the PenFed Gold Visa offers 0% interest on balance transfers for 12 months on balances transferred by September 30, 2021. PenFed Credit Union has open eligibility for service members and civilians.
To rebuild your credit score, the Savings Secured Visa Platinum Card from State Department Federal Credit Union allows you to secure your credit limit with funds in your savings account. You can earn rewards and enjoy a significantly low interest rate on purchases. To join, you must be an employee or a relative of an employee of the U.S. Department of State or work for a member organization or join the American Consumer Council to become a member.
Source: https://www.thebalancemoney.com/are-credit-union-credit-cards-better-4159895
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