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Credit Union Credit Cards

If you’re tired of dealing with your bank, you can look for a new one, stuff your money under your mattress or you can try a credit union. If you’ve never considered the last option before, here is some information. Joining a credit union could make it easier to get a loan, lower your fees and give you special incentives that you won’t see as a customer of one of the top ten banks. Plus, applying for a credit union credit card can be an easier route to good credit. But these cards do come with some costs. We’ve got all the details for you.

Find out now: Which credit card is best for me?

What Is a Credit Union?

Credit unions are not-for-profit, member-owned co-operatives that offer banking services. These members have input into how credit unions are run. Boards of member-only volunteers get together to vote and make decisions for their credit unions. When you join a credit union, you’re considered a member, not a customer.

Much like major banks, credit unions allow customers to secure loans, open checking accounts and (often) access banking tools through their mobile phones. They also offer credit cards that you can apply for online or in person.

Credit Union Credit Cards: The Pros

What’s with all the hoopla around getting a credit card from a credit union? Well for one thing, you won’t have the stress of dealing with ultra-high interest rates. Credit unions tend to have annual percentage rates (APRs) that are slightly lower than those offered by traditional banks.

Credit unions are also known for having fewer (and lower) fees. If you’re planning to do a balance transfer – meaning that you’re covering the debt you owe on one credit card by shifting it onto another – there won’t be an additional charge in most cases. And if you shop when traveling abroad, your foreign transaction fees will be low or nonexistent with a credit union card.

Credit union credit cards work the same way that ordinary cards do. You’ll get a monthly bill that you have to pay off. Your payment record affects your credit score. If you find yourself struggling to make your payment deadline, you might have more time to get your act together than you would with a regular bank. If you do end up owing a late fee, it’ll likely be lower than the ones charged at big banks.

Related: How to Really Read Your Credit Report

Are you concerned that you won’t have very many credit cards to choose from at a credit union? Don’t worry. Credit unions offer the gamut of cards. You’ll still be able to apply for a rewards card if you’re chasing points or cash back. Credit unions also offer cards for students and secured cards. Secured cards can be an option for people with bad credit or no credit at all. Secured cards allow you to set up a security deposit in a separate account that serves as your collateral.

One of the biggest advantages of credit union credit cards is not well known. Credit unions are subject to different rules than the big banks. They’re required to follow certain laws that prevent them from taking advantage of customers. They are not legally allowed to do things like overcharge members or suddenly raise fees.

Related: 4 Reasons to Make the Switch to a Credit Union

Credit Union Credit Cards: The Cons

Before you sign up for a card through a credit union, though, consider some of the downsides of that choice. Credit cards are only available to credit union members and there are certain restrictions on who can join. Some credit unions are for people who belong to specific organizations – the military, for example – while others are meant for people living in a particular region. Even if you can qualify for membership, your credit union might not offer any credit cards.

Plus, credit union credit cards tend not to offer cutting-edge perks and rewards. There might be rewards cards available, but with restrictions that mean you can’t rely on your card to, say, fund a summer vacation. You could get cash back, but maybe not as much as you would with another card. Your credit union may or may not give you the option of getting a secured card. So, if you have your heart set on a secured card or on a rewards card that will maximize your benefits, you might be better off sticking with a card from a regular bank.

Even if you don’t care about rewards, credit union cards aren’t perfect. Credit limits for credit union credit cards are often lower than the limits that traditional banks offer, at least when you first open the card. Your limit should increase, though, once the credit union you’re banking with sees that you are able to make your payments on time.

Another major problem you could come across is called cross-collateralization. That means that your credit card account is connected to any other loan you have with that credit union. When you fail to pay down one debt, your other debt can be used as collateral. In other words, if you continue to miss the due date for your card payments, your credit union could take the car that you bought using money from one of their loans.

One more thing: A small percentage of credit union credit cards are actually issued through a traditional bank. That means that if you get one of those cards you’ll be subject to the same old bank rules and fees you were trying to avoid by switching to a credit union. Our advice? Make sure to read the fine print.

The Bottom Line

Credit union credit cards could be the way to go if your credit score isn’t great or if you’re sick of paying high fees and interest rates. However, if you care more about getting special discounts from rewards cards or you can’t find a credit union that’s right for you, a traditional credit card might be a better fit.

You won’t know which credit card is the best fit until you shop around and do plenty of research. When you pick a card that looks promising, it’s a good idea to read up on that card’s terms and conditions before you sign your name on the dotted line.

Photo credit: ©iStock.com/PeopleImages

Amanda Dixon Amanda Dixon is the editorial assistant at SmartAsset. She studied journalism and sociology at the University of Georgia. Born and raised in metro Atlanta, Amanda currently lives in Brooklyn.

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