Smart Borrower Blog

Credit Unions May Offer Best Credit Cards Deals

According to a recent study released by the Pew Charitable Trust, you may be much better off applying for a credit card from your local credit union than with any of the nation’s top banks.

“The observed credit unions presented a distinct alternative to credit card pricing and other practices of
the observed banks,” the study entitled “STILL WAITING: ‘Unfair or Deceptive’ Credit Card Practices Continue as Americans Wait for New Reforms to Take Effect” said. “In July 2009, median advertised interest rates on cards from the 12 largest credit unions were between 9.90 and 13.75 percent annually, depending on a consumer’s credit profile - approximately 20 percent lower than comparable bank rates.”

In a comparison of bank credit cards versus credit union cards during the past year, the credit unions had not only lower interest rates, but lesser penalties and fees.

• 99 percent of bank cards imposed a late fee with a median cost of $39. The same percentage of credit unions imposed late fees, but the median cost was only $20.
• 80 percent of banks charged an overlimit fee with a median price of $39. Eighty-nine percent of credit unions charged an overlimit fee on their credit cards but the median price was again just $20.
• Banks charged a median penalty interest rate of 28.99 percent, while the median credit union penalty interest rate was 17.90 percent.

“Compared to bank cards, credit union cards more closely complied with guidelines against ‘unfair or deceptive’ practices that the Federal Reserve developed last year,” the report concluded. “For example, nearly half of the credit union cards included no penalty rates at all, and more than three-quarters of those that did have penalty rates would have met the Federal Reserve’s fairness rules.”

Credit unions represent only one percent of total credit card lending in the U.S. and most require either membership in some kind of group or employment. Some are open just to residents of certain towns or counties. But if you can qualify for membership, a credit union card might be your safest and cheapest way of getting credit.