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Credit Cards

Credit Union Credit Cards

Updated Jun 13, 2023   |   5-min read

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If you’re in the market for a new credit card and hoping to score a card with a great rate, a local credit union card is one credit card type to consider. Credit unions often have interest rates well below those offered by banks or other card issuers because they’re nonprofit organizations with the goal of providing financial services to their members—not corporations whose goal is to make money.

For that reason, credit unions are known to offer their members lower rates and are more likely to approve people with thin credit files or less-than-ideal credit for credit cards. But while there are many benefits to getting a credit card from a credit union, there are also some drawbacks. Before you fill out an application, be sure you understand just what you’ll gain and give up by getting a credit union credit card.

Benefits of Credit Union Credit Cards

Lower Rates

According to a study conducted by Pew Charitable Trusts, credit unions offer median interest rates that are around 20% less than you would pay on a card issued by traditional bank. Those interest rates add up if you carry a balance or even just miss a payment. One example is the Lake Michigan Prime Platinum Visa, which offers interest rates that start at prime plus 3.00%.

Credit unions are also more likely to approve people who have less than ideal credit for credit cards with lower interest rates than other lenders.

Lower Fees

The Pew Charitable Trusts study also found that you will pay fewer fees if you have a credit union credit card. When it comes to penalty rates charged on outstanding balances, credit unions imposed a rate that was more than 10% lower than bank cards – 17.9% APR versus the 28.99% APR banks charged. In fact, around half of credit union credit cards didn’t charge penalty interest rates at all and those that did often only charged those penalties rates when an account was 60 days overdue. In contrast, just 10% of bank credit cards didn’t charge a penalty interest rate.

Credit unions also don’t tend to charge when you transfer a balance to your credit card. The Pew study found that just 25% of credit union credit cards actually charged a fee for balance transfers versus 88% of bank credit cards. The credit unions that did charge a balance transfer fee often had a cap on the amount that they were able to charge.

When you get a credit union credit card you might also be saying goodbye to overlimit fees, cash advance fees, and late payment fees since many credit unions either don’t charge fees in these circumstances or have significantly lower fees. One great example of this are the cards offered by Digital Federal Credit Union which have no balance transfer fees, no annual fees, and no cash advance fees.

Easy Approval

If you have fair or poor credit or little credit history, a credit union is going to be more likely to approve you for a credit card at a reasonable rate than a traditional bank. Because you are a member and not simply a customer and they’re a small organization with more flexibility, credit unions are often more willing to take a risk on someone who doesn’t have ideal credit.

Drawbacks of Credit Union Credit Cards

Fewer Rewards

If you use your credit card to earn rewards, then you might be disappointed with what credit union credit cards offer. Because you’re saving on interest rates, credit unions tend not to provide a lot of rewards on their cards. So, if you’re hoping to use points to pay for your next trip to Tahiti, you’re better off getting a card from a traditional bank. If you still want a credit union card, then cards like Alliant’s Visa Signature Card provide great rewards.

Fewer Sign-Up Bonuses

Similarly, if you are hoping to take advantage of a sign-up bonus, you likely will not want to get a credit union card since they aren’t known for extravagant bonuses.

Secured Cards

Credit unions often cross-collateralize your credit accounts. That means that if you have an auto loan or a mortgage with the credit union, your credit card might be secured by your car or your house. While this might allow the credit union to offer you more attractive rates since they’re taking on less risk, it could mean that if you fail to pay your credit card bill your car could be repossessed.

Bottom Line

Make sure to look before you leap when it comes to taking out a credit union credit card. If you regularly carry a balance on your card, then you’ll likely save a bundle in interest and fees by getting a card from a credit union. But if you pay off your card every month and just want to rack up rewards points so that you can get cashback, you’re better off getting a card from a traditional bank.