Credit cards offer a lot of advantages and disadvantages at the same time. Having a credit card makes everything easy especially when it comes to purchases. However, if it is misused, it can also cause a whole lot of financial problems.
What you need to know is the credit card in banks is different than the ones in credit unions. You should look beyond the big offerings of the big banks because if you look closely, you will find that credit unions actually have terms which are friendlier to consumers.
If you are thinking about applying for a credit card, here are the advantages of the credit union credit cards that you need to know.
1. There is a limit with the interest rate
Credit unions do not charge their members of more than 18% for the credit card interest rates. There is a federal law that prohibits this. On the other hand, banks do not have a cap or limit on how much they will be charging their consumers for the interest.
On an average, many bank credit cards charge around 16 to 17 percent for the interest but then, if you constantly have a past due and you always carry over a balance, you should be concerned because you can be charged for as much as 20 percent for the interest, or even more. But if you are with a credit union, there is a limit to the interest rate you could be charged, which means you could still save hundreds or thousands of dollars in a year.
2. Lower interest rates
Not only do credit unions have a limit on the interest rate, they really have lower interest rates compared to banks. In fact, the credit cards issued by credit unions have interest rates that are 20 percent lower than the ones issued by the banks. The lowest credit card interest rate by credit unions is 9.9 percent compared to the 12.2 percent by the banks, and this is according to a survey. This only goes to show that credit unions offer significantly lower interest rates compared to bank.
3. Credit unions offer lower fees
When it comes to penalties, credit unions charge their consumers fees that are significantly lower than banks. If you go over your credit limit or paid your bill late and you are with a bank, you can only expect a high penalty on your next statement. But this is not the same case with credit unions because the penalties are much more affordable and reasonable.
4. Credit unions are owned by their members
This is one of the best things about credit unions – they are owned by their members, unlike the banks which are owned by shareholders or stock holders. So what does this mean? It means that credit unions are simply not existing to make profit from their consumers because their consumers are the ones who own the organization. Whatever they earn is profitable to each and every member. On the other hand, if the bank earns, the ones who will benefit are the shareholders alone.
The purpose of credit unions is simply to provide services to their members, as opposed to banks which exist purely for business. In short, credit unions are non-profit organizations but the members basically get almost the same type of services that people get from banks.
5. There are second chances with credit unions
In credit unions, when you apply for the credit card the first time and your application gets rejected, you have the option to apply again. You can request for the management to take another look at your application. If you get denied but you feel that you are qualified and you have enough income to support the credit card, you can actually write a letter to the committee of the credit union so that they can reconsider.
Credit unions do not just look into your credit history and expenses, but they are also looking at your intention, and motivation, that is why you are encouraged to write a letter. Opportunities do not stop just because the applicants had a bad luck in their finances in the past because they are always given a second chance.