The pros and cons of credit union credit cards -CreditCards.com

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Credit cards may not gain as much attention as popular cards from major issuers, such as Chase or American Express. That’s not to say they’re not worth looking into. A card from a credit union can be not only a great option for those with a lower credit rating, but also a finishing touch to an avid card enthusiast’s strategy.

I got a credit card last month with good credit and some of the best credit cards already in my wallet. Now it has the potential to become one of the most valuable cards I have because of how well it matches my spending.

Read on to learn more about credit union credit cards and their pros and cons and to see if this type of card might be a good choice for you.

Advantages of the credit card

The list of benefits of credit union credit cards is long – see if some or all of them appeal to you.

Fees and interest rates tend to be lower

Credit unions are member-owned non-profit organizations and the whole system works slightly differently from banks. For this reason, you can get lower interest rates as well as lower fees.

Annual fees, overseas transaction fees, and late fees are also lower in a credit union compared to a traditional bank. In fact, although 45% of traditional bank credit cards have annual fees, only 10% of credit union credit cards do.

You can get great value from the card

It is a misconception that only banks with significant resources can offer generous credit card rewards, and credit unions cannot compete.

Of course, a credit union card probably won’t give you premium perks like access to airport lounges or hundreds of dollars in statement credits. Nonetheless, if you enjoy making as much money as I do, you might be surprised at the value that credit union cards can offer.

Take the Visa Signature® Affinity Cash Rewards credit card that I have. I stumbled upon it while buying a credit card that would reward me for spending in bookstores (since being a bookworm can be an expensive hobby). What I got was more than a great bookstore card – it was the perfect finishing touch to my credit card strategy.

Affinity Cash Rewards earn 5% at bookstores, including Amazon.com (up to $ 3,500 per month for purchases made on Amazon). With the exception of books, I do virtually all of my shopping on Amazon. Imagine how excited I was when I received this card. This is an extremely generous cash back rate, there is no annual fee, and no Prime membership is required.

Last year I spent $ 2,168 on Amazon (I exclude grocery orders since I use the Gold American Express® card for this). I also spend around $ 2,000 on books each year. If my spending stays the same, I will have earned over $ 200 in cash back with Affinity cash rewards by my first year card anniversary, just in these two categories. But in addition to rewarding you for Amazon and your book purchases, the card also offers 2% cashback at qualifying supermarkets, restaurants, gas stations, and for streaming and rideshare services, as well as 1% cashback on everything. the rest. These cash back rates can put some popular rewards cards from the big banks to shame.

Customer service will likely be excellent

One of the biggest advantages of credit unions is their focus on the customer experience.

This means that you will generally receive excellent customer service and a lot more flexibility in terms of payments, as credit unions aim to support their customers and help them maintain their financial stability.

Credit unions are local institutions that try to connect with a community, those that work for certain businesses or have a specific mutual bond. As such, they focus on building trust and a brand within a community.

This too often translates into better local customer service.

I was pleasantly surprised when I received my union credit card and received a call from union customer service. It was a rep who had emailed me earlier to let me know that she would be my point of contact with any questions. When she called, she asked me what my experience was with the card and if I needed any help setting things up.

I have cards from some large issuers known for their excellent customer service, but none of them were able to offer me that level of attention or a designated person I could contact.

You may find it easier to get credit

It is generally easier for members to obtain credit from a credit union if their credit is not perfect.

This allows consumers with less than perfect credit to get a quality credit card product even when more well-known cards may not be available to them.

Additionally, credit unions are more flexible with small businesses and their unique needs, such as gas cards for employees or multiple users on one account.

You can get a second chance if you are refused

Consumers with a lower credit score or even an average credit history may find it difficult to obtain a credit card from a bank. But if a credit union denies your credit card application, you can ask them to reconsider the decision.

Sometimes credit unions will accept your application and ask you to enroll in financial education classes to make sure you learn how to use it responsibly.

See linked: How Credit Ratings Affect Interest Rates

The disadvantages of the credit union

Most financial products have some drawbacks, and credit cards from credit unions are no exception. Here are some things to consider before applying for a card from a credit union.

Your other accounts are used as collateral

Perhaps one of the main drawbacks of using a credit union for a card is that it can sometimes use a cross-guarantee system, which ties all of your credit union accounts together.

For example, if you have more than one loan from the same credit union and for some reason you cannot make a payment on one of them, it is automatically secured against the other loans you have. Suppose someone pledges a used car as security for a personal loan and does not pay off a credit card payment – that car could be repossessed to pay off the credit card debt.

Fortunately, this is not always the case. It is possible to obtain a cash card without securing it with any guarantee. Be sure to research various options and pay attention to conditions to avoid getting a card under conditions you are not comfortable with.

You must meet specific membership criteria

To get a credit card from a credit union, a customer must meet the membership criteria. This can be a restriction on location, employment, or a variety of membership eligibility requirements. For example, I was once turned down by a credit union in Dallas when refinancing my car loan because the co-op only serves US citizens – not permanent residents (rude).

When you apply for a credit card at a bank, you usually don’t need more than the legal requirements, and your application is only dependent on your credit history and income.

On the flip side, many credit unions offer the option of becoming a member for a nominal fee if you do not meet the membership criteria.

The application process can be long

In my experience, getting approval from a credit union can be a bit stressful. I have gone through this process three times – twice when trying to refinance my car loan and once when applying for a credit card – and each time it has been painful.

What takes five minutes when you apply for a card with a major issuer can take days and even weeks with a credit union. You may be asked to send your pay stubs to prove your income and utility bills to prove that you live where you say you live, among other things. It slows things down considerably.

Customer service may not be available 24/7

While a credit union can provide exceptional customer service, it may not be available 24/7.

For example, if you are traveling and have a problem with your card, you may not be able to contact the credit union customer service immediately.

See linked: How long does it take to get a credit card?

Decision time

While there are advantages to credit union credit cards, there are also disadvantages.

Membership can be exclusive, card approval is not guaranteed just because you are a member and the application process can be stressful.

On the plus side, since credit unions don’t offer for-profit credit cards, members benefit indirectly from these credit cards – when credit unions make money, they can offer better rates. interest, reduced fees and even valuable rewards.

Otherwise, credit union credit cards are like major bank credit cards.

You can use them for purchases, balance transfers, and cash advances, and you must make at least the minimum monthly payment to keep your account in good standing.

Plus, most credit unions report your account history to Experian, TransUnion, and Equifax, which is an added incentive to make your payments on time as it can help you build your credit.

Editorial disclaimer

The editorial content on this page is based solely on the objective evaluation of our editors and is not motivated by advertising money. It was not supplied or ordered by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.


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