If you are searching for ways to decrease the amount of fees and interest you pay to use your credit cards, consider getting a credit card from your local federal credit union. Credit unions are non-profit organizations that are owned by members and operated for the benefit of those members. Rather than operating purely for profit, credit unions use their resources to provide members lower rates for loans, better interest rates on savings and fewer service fees. The National Credit Union Administration is a federal agency that is charged with supervising credit unions in the United States. Because credit unions are not governed by a board of directors that must constantly be concerned with the bottom line to report to shareholders, credit unions can offer some distinct advantages with their credit cards that other banks and financial intuitions do not.
1. As stated above, credit unions are owned by members; therefore, they are more concerned with providing themselves with great service than becoming a Wall Street superpower. When owners are also the very customers who walk in and out of the banks doors, they are more invested in providing superior services because they are also the recipients of those services.
2. Because federal credit unions are governed by federal law, unlike companies that are operating purely for profit, federal credit unions cannot charge more than 18% interest on their credit cards. Federal credit unions are prohibited from going above this federal limit so even if your credit score is not as perfect as it should be or you carry a high balance, you are guaranteed a maximum rate of 18% interest for your credit cards.
3. According to a study by the Pew Foundation, on average, credit cards issued through federal credit unions carried interest rates that were 20% lower than the very same cards issued by banks. This savings translates into more money in your pocket rather than in the banks pocket each month. This also helps pay balances faster because more of your payment can be applied to principal rather than interest.
4. Federal credit unions are safe, stable and offer a wide variety of credit options. Credit unions are backed by the National Credit Union Share Insurance Fund (NCUSIF). Backed by the United States government, the NCUSIF insures member accounts in all federal credit unions. Therefore, federal credit unions are stable giving them the ability to offer lower interest rates and better services without creating fear they will lose members’ money.
5. Anyone who has obtained a credit card, loan or mortgage through a federal credit union will tell you that the process is much simpler than the same process through a bank. Paperwork is limited to what is absolutely necessary to keep the federal credit union operating efficiently and cost-effective.
The National Credit Union Administration
Credit Union National Association
David K. Randall. “Five Reasons To Switch To A Credit Union Credit Card” (Forbes.com)