Are Credit Union Credit Cards Good? | How Do They Compare to the Traditional Banks?

Credit unions are a popular alternative to using traditional banks for financial needs. In recent years, however, the growth of online banks and lenders has increased competition, cutting into the credit union’s market. Even so, …

Credit union boxes on a table

Credit unions are a popular alternative to using traditional banks for financial needs. In recent years, however, the growth of online banks and lenders has increased competition, cutting into the credit union’s market. Even so, for many Americans, credit unions still remain an excellent and sought-after choice — and for good reason.

Credit unions differ from traditional banks in a number of ways, including the credit cards they issue. Read on to find out the differences between credit unions and banks, and whether credit cards from credit unions are a good choice considering how regular credit cards work.

Credit Unions vs. Banks: An Overview

Credit unions and traditional banks differ in some fundamental ways. First off, banks are for-profit institutions, while credit unions are not-for-profit. In fact, credit unions are customer-owned, hence why you typically must qualify for a membership to be a customer at a credit union.

Credit unions are generally known to offer some notable advantages over banks. Credit unions often have lower fees and more competitive interest rates than traditional banks, while the latter tend to have just the opposite — higher fees and less competitive interest rates. To find out more about interest rates, check out this article.

However, when it comes to convenience in terms of location, rewards programs, mobile access and technology, banks tend to have the advantage.

What Are Credit Union Credit Cards?

Credit union credit cards are cards issued by a specific credit union. Credit union credit cards can be co-branded, such as partnering with a card network, such as American Express, Mastercard or Visa. Or they can be branded on their own, which means they are not co-branded with a card network.

How Credit Union Credit Cards Outshine Standard Credit Cards

Of course, the No. 1 question is, why would you opt for a credit union credit card when you are so used to the normal bank-issued variety? There are several reasonable answers to this question, much of them related to the nature of credit unions versus traditional banks.

For example, since credit unions are nonprofit operations, there are no set standards as to what rates to charge and fees to take. When there are no industry standards pushing the limit, you usually end up with more competitive rates than you would from the normal channels.

And when you compare credit union credit card fees to the average credit card fees, you’ll generally get lower fees for every comparison.

Credit Union Credit Card: Pros

Here are some of the main good reasons to go with the credit union credit card over a standard version. In general, credit union credit cards tend to beat standard banks and credit card issuers in these areas:

Annual Fees

For one thing, credit unions tend to be very good in terms of offering no annuals fees or lower annual fees than other credit cards. In fact, 45% of traditional bank credit cards charge annual fees, whereas only about 10% of credit union credit cards do.

Late Payment Fees

Another area credit union credit cards outshine bank-issued cards is regarding late payments. You’ll pay, on average, $35, for making your monthly credit card payment late at a major bank. With credit union credit cards, that average shrinks down to around $22.50. In total, the average annual cost of ownership for a credit union credit card is roughly 50% less than the average bank-issued credit card, according to Bankrate.

Lower APRs

Unlike standard cards, the interest on credit union credit cards is capped by the federal government. According to the Credit Union National Association, as of December 2018, credit union classic credit cards featured an average APR of 11.6%, whereas bank credit cards offered a higher average APR of around 13.5%. This is why you’ll typically find lower APRs on credit union credit cards compared to their bank-issued counterparts, excluding 0% APR offers.

Secured Credit Card Options

In case your credit is so bad that you won’t get approved for a standard credit union credit card, you can still apply for a secured credit union credit card. Secured cards come with lower credit limits, but if you’re floundering with a rock-bottom credit score, this might be your best — or only — option.

No Balance Transfer Fee

You’ll also notice that a balance transfer fee is conspicuously missing from the list of fees for a credit union credit card. That’s because most cards issued by credit unions won’t include such a fee, which often ranges from 3% to 5% of the total balance you transfer. In short, making a balance transfer onto a card without the fee can equal significant savings. If you want to get longer transfer balance periods, read this post!

Credit Union Credit Card: Cons

As with most things in life, wherever there are advantages, there tend to be some drawbacks. Fortunately, when it comes to credit union credit cards, the drawbacks are fairly minor. Here are some of the cons of credit union credit cards.

Approval Process

To get approved for a credit union credit card, you’ll have to be a member of the credit union that offers the card. Membership generally is restricted to a unique group, community or organization.

It’s worth checking with any associations, clubs or employers you are connected to in order to see if you qualify for any credit union cards. You can also check with CUNA to see if you are eligible for one.

Buying In

To qualify for a credit union credit card, you’ll need to purchase a share of the credit union. Joining a credit union doesn’t entail a huge commitment. Instead, it can be as simple as a single deposit into an account run by the credit union.

Lower Credit Limits

Some credit unions may offer lower credit limits than traditional, big banks. It’s possible that the structural differences between banks and credit unions could limit how much credit a credit union is willing to extend.

Like with bank-issued credit cards, however, credit unions will likely raise your limit after some time with the card and consistent, timely payments.

The Bottom Line

If you find that you’re eligible for a credit union credit card, consider the offer because it might give you the best rates anywhere. Remember, credit union credit cards generally offer lower APRs and late payment fees — and many of them waive the annual fees and balance transfer fees altogether. If the card you are eligible for checks off all those boxes, you could save significantly on monthly fees and interest payments.

We are not financial advisors. The content on this website and our YouTube videos are for educational purposes only and merely cite our own personal opinions. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won't experience any loss when investing. Always remember to make smart decisions and do your own research!

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