Is a Credit Union Credit Card Worth It?

FT Contributor
A series of credit union credit cards sitting on a table, next to a laptop.
Reading Time: 5 minutes

If you’re thinking about applying for a credit card, there are many things to consider before doing so. Whether you are a first-time applicant or you’re looking to add another card to your wallet, you should consider things like your overall income, spending habits, and any rewards cards that might be beneficial to your lifestyle.

Once you have decided how to best use a credit card in your personal financial plan, it is time to consider your source of credit. Consider applying with a credit union. Unlike traditional for-profit banks, credit unions are nonprofit organizations that are known for their customer service and community focus.

Credit unions often have great rates for their members, who also happen to be part owners of the credit union. Without members, a credit union wouldn’t be able to exist. To become a member of a credit union, you typically must:

  • Be a friend or family member of someone who is already a credit union member.
  • Be employed by a company that is part of the credit union.
  • Be a member of a religious, educational, or community organization.
  • Live within the geographic location that the credit union serves.  

If you’re curious about opening a credit card account with a credit union, this guide will explain the pros and cons of adding this method of payment to your wallet.

Pros of Credit Union Credit Cards

Many people take advantage of credit union credit cards for the benefits outlined below.

Fees, APR, and Interest Rates Are Usually Lower

The annual percentage rate (APR) is what determines the interest rate on a credit card. Credit card interest rates typically have variable, fixed, or promotional rates. With credit union credit cards, the APR and consequently the interest rates offered are sometimes lower than those rates offered by traditional credit card companies. Similarly, the fees associated with credit cards, such as late fees or overdraft fees, can be lower with credit cards offered by credit unions.

If you’re looking for lower fees and interest all around, a credit union credit card might be the best option for you. Remember that interest kicks in if you carry a balance on your credit card, and you can avoid hefty interest charges and late fees by paying your credit card bills on time and in full.

Customer Service

Unlike traditional banks that focus more on generating money for their board of directors, a credit union seeks to provide the best service to their customers. If you’re looking to speak to a human when you run into an issue with your credit card, a credit union might be your best option. Big banks often automate or outsource their customer service, which is why many people prefer the human interaction you get with credit union customer service.

You Don’t Have to Have Perfect Credit

Most banks and credit card companies make it difficult for those with below-average credit scores to obtain a credit card. Many credit unions are more willing to work with people who don’t have perfect credit. If you have made credit card mistakes in the past and now have poor or no credit, applying for a credit card with a credit union may be a viable option.

You Can Reapply After Rejection

While your initial application for a credit card may be denied, a credit union might reconsider your application if you’re willing to take a financial course that they offer. If you’ve experienced problems with credit in the past, a credit union may provide you with an opportunity to get started on the path to better credit.

You Could Get a Special Offer

Some credit unions will make special offers to new members or referrals. From 0% APR to waiving fees on credit card applications, there are a number of ways a credit union will incentivize people to sign up for a credit card. If you are planning to make a large purchase where 0% interest could benefit you for a period of time, you might consider obtaining credit through a credit union.

Cons of Credit Union Credit Cards

Below are some of the reasons people do not seek credit through credit unions.

You Must Become a Member

Credit unions have specific requirements you must meet to become a member. In some cases, you may not be able to qualify, in which case you’d be unable to take part in special offers that a credit union in your area provides. With traditional banks and credit card companies, there are fewer restrictions on who can apply for credit.

Your Accounts Are Used As Collateral

Credit unions unify all of the accounts you have open with them. If you default on a payment for one account, they could use another account to satisfy a missed or late payment.

For example, if you have a credit card and a mortgage loan with a credit union and your credit card goes into delinquency, your home could be repossessed to satisfy the missed payments on the credit card. If you already have loans with a credit union but are unsure you’ll be able to make credit card payments on time, you may want to reconsider opening a line of credit.

They May Ask You to Take a Financial Education Class

If you have poor or no credit, a credit union may require you to take a financial education class prior to becoming a member or opening a line of credit. Traditional banks and credit card companies may not make you take this type of course, but they could charge you higher fees and interest rates in the long run. Whether or not you want to take this course depends on your credit history and desire to rebuild it.

Bank Issued Cards May Offer Better Rewards

While credit union credit cards typically come with lower fees and interest rates, they don’t always come with the best rewards. Traditional credit card companies have more leniency with the rewards they offer. From cards with in-store discounts to gas cards and travel cards, there are a variety of rewards card options out there that might better benefit your lifestyle.

Credit Union Credit Cards May Have Lower Limits

Generally, credit union credit cards have lower limits than bigger name credit card companies. This is because credit unions are usually smaller operations that have to protect themselves from their members defaulting on credit payments. If you’re someone who uses a credit card to pay bills, you might reconsider opening a line of credit with a credit union, depending on their credit limits.

Availability of Customer Service

While credit unions are known for their superior customer service, it may not be available 24 hours a day, seven days a week like other credit card companies. Again, credit unions are typically smaller operations without the manpower to provide customer service that is always available. If you feel you’re going to need customer service at the ready, you might reconsider applying for credit with a credit union.  

Is a Credit Union Credit Card for You?

Whether a credit union credit card is right for you depends on your financial status and overall spending habits. For instance, if you’re someone who has struggled with credit in the past and are looking to build or fix that credit, or you’re simply looking for more affordable fees and interest rates, opening a credit union credit card might be beneficial.

However, if you’re someone who uses credit cards to make a majority of your purchases, a credit card from a credit union may not be the right option for you.

To choose the best credit option for you, consider your income, the many types of credit cards available, and how you plan to use your credit card.

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