How many people do you know who are happy with their credit card companies?
Finding someone without a laundry list of complaints about credit card companies is like finding someone who gets excited about jury duty.
However, talk to a member of a credit union, and you might find yourself listening to something that sounds a lot like a 5-star Yelp review of their favorite neighborhood restaurant.
What is a credit union?
Credit unions are not-for-profit financial cooperatives that are dedicating to providing services to their members rather than making a profit.
Members borrow from pooled deposits, and credit unions are community-oriented, member-owned, and democratically run. If you are a member of a credit union, you are also a stakeholder.
Credit unions also vary greatly in size, form small volunteer operations to huge national chains with hundreds of thousands of members and billions of dollars in assets.
What are the benefits of credit union credit cards?
Better Customer Service
When a bank has 7-figure investors to serve, and those aren’t even the high rollers, your needs are almost never a top priority.
According to a survey done by the Journal of Service Theory and Practice in which they polled both credit union and bank customers regarding service quality, credit unions ranked significantly higher than banks in almost all of the 14 categories.
I still remember the time that I went abroad with a new credit card from my credit union and forgot to activate it before leaving the country. I didn’t realize this until I went to pay for a pretty expensive meal and had my card declined.
My representative sat on the phone with me for 30 minutes while I scoured my email for the information he needed, going out of his way to come up with a creative solution that got my card activated while still maintaining my security. He gave me both a direct line to call and his email address in case I needed any further assistance while abroad. I’ve yet to have a problem he couldn’t solve on the spot, including losing my only debit card in the middle of the jungle. Twice.
Cheaper Rates
Because credit unions are not-for-profit, profits are passed on to members in the form of low interest rates, low (or non-existent) fees, and favorable terms. Some of the best deals and lowest interest rates on credit cards can be found at credit unions.
Community Oriented
If you like being a part of something that takes an active role in your community, credit unions are a wonderful option. Community involvement is important to credit unions – their customers are community members, and their customers are partial owners, so in effect, credit unions are community-run institutions.
Because of this, many credit unions offer free services such as financial workshops and events to the community. On top of that, they often fund community projects and small business endeavors rather than huge, multi-national enterprises.
Alternative to Major Banks
After the financial crisis in 2008, trust in the banking industry hit an all-time low…and it hasn’t recovered.
Since then, many things have happened to discourage people from giving their money to Wall Street and major credit card companies. Credit unions are a brilliant solution for people who don’t want to be involved in the banking industry.
Member-Owned, Democratically Run
One of the core principles of credit unions is that they are member-owned and run democratically.
It doesn’t matter how much money you have in the bank or whether you have a double platinum VIP credit card. Whether you’re using that credit card to buy dollar menu burgers or private islands, they run on a 1 person 1 vote system when it comes to things like electing the Board of Directors.
What are the disadvantages of credit union credit cards?
Limited Locations
Unlike huge national banks, many credit unions are limited when it comes to branch locations. Some only have a handful of branches, all located in one community, which can be inconvenient.
However, most credit unions have sol3ved that problem. Mid-sized and large credit unions offer full online banking services now, and some even offer 24-hour live representative services, which is almost unheard of at traditional banks.
More importantly, there are extensive credit union networks, such as the CO-OP Financial Services Network, with nearly 30,000 ATM locations and over 5,000 shared branches. If your credit union is a member of one of these networks, you can take care of your banking needs at any one of thousands of credit unions across the country the same way you would at home. Sometimes, it’s actually easier to find a partner location near you than it is to find a branch of some of the largest national banks.
Fewer ATMs
Big banks may have more ATMs that are conveniently located for you.
But if you’re worried about ATM fees, many credit unions refund ATM fees or have partnerships that allow you to use participating ATMs free of charge. For example, First Tech Federal Credit Union allows its members to use the ATMs at all 7/11 locations without incurring a fee, in addition to ATMs at other credit unions in their network. Also, they rarely charge you ATM fees – those are usually coming from the bank that owns the ATM you’re using.
Regardless, it’s important to remember that using your credit card at an ATM is considered a cash advance, and isn’t recommended except for in the case of emergencies.
Banks May Offer Better Rewards
Because of their size, banks are able to partner with major airlines, hotel chains, and retails and offer co-branded cards that can have some pretty stellar rewards. If you’re looking to stock up on airline miles and free hotel nights, it can be hard for credit unions to compete.
Major banks also have some pretty competitive introductory offers, like fee-free balance transfers and 0% introductory APRs. However, some credit unions have similar (or better) offers.
Low Credit Limits
Rules on responsible lending can mean that your credit limit will be lower at a credit union than a bank.
Credit unions may not be able to approve huge credit limits, even for people who are more than capable of repaying on time. They have to be careful more careful about ensuring that their costs don’t exceed their revenue, and people with multiple debts will often pay off their credit union debt last because it has the most favorable terms.
Limited Investment Offerings
If you’re considering getting a credit card and opening a savings account or doing some investing, some credit unions may have more limited investment offerings. Many only offer one type of savings account, for example, which isn’t advantageous for investors with large deposits.
Of course, this varies depending on the size of your credit union. If you need access to a wider range of financial options, a larger credit union might still have what you’re looking for. And because credit unions have a low overhead, they’re able to pass that off to customers in the form of higher returns on savings accounts.
How do I join a credit union?
While credit unions usually have requirements to become a member that you’ll need to fulfill in order to take out a credit card, it is often as easy as signing up for a free membership to a non-profit they’re associated with or paying a $5 membership fee.
If you have a relative or friend who banks with a credit union, that’s the best place to start. Often you can automatically become a member through your association with a current member.
You can also look to your employer or any organizations you belong to, be it a non-profit, a government organization, the military, or trade unions. They might have a partner credit union.
Finally, simply look for credit unions that are located in your community. If you like what you see, ask how you can become a member.
