Although consumers are aware that banks provide a variety of different financial services, far fewer consumers know about credit union credit cards, loans, insurance and savings accounts. Credit unions offer their members a variety of different services. Members join on the basis of a shared interest, such as religion, locality or their chosen vocation. Subject to status and affordability, a member may be able to borrower money on more competitive terms than offered by a mainstream financial institution.
Why Credit Union Credit Cards Impose Lower Charges and Charge Less Interest
They are a non-profit organisation that operates purely for the best interests of their members, not shareholders. According to a recent study by the Pew Charitable Trust, the rate of interest and charges are far lower than banks so it is worthwhile checking whether credit union services are more affordable. They are also more inclined to show greater understanding in the event of a member experiencing problems keeping up with the repayment schedule.
Credit Union Services Are Far Cheaper Than the Banks
- The rate of interest is 20% lower than that charged by the banks.
- Fees for going over the assigned credit limit are an average of $19 lower.
- No fee balance transfer credit cards are provided by 75% of credit unions and only 12% of the banks. The fee for transferring money between cards is about 4%.
Reduce Debt with a No Fee Balance Transfer Credit Card from a Credit Union
An interest free transfer could save a member money. A Consumer Action credit card survey in July 2008 revealed that the median interest rate on unpaid credit card debt was 13.54%. This means that $1,354 of interest will be paid each year on an outstanding balance of $10,000. Whilst banks offer balance transfer credit cards, the overwhelming majority charge a 4% administrative fee. Although policies vary between providers, it may now be possible to avoid this charge.
National Credit Union Administration (NCUA)
While banking customers receive coverage from the Federal Deposit Insurance Corporation (FDIC) in the event of insolvency, credit union members receive protection from the National Credit Union Administration (NCUA). This is a completely independent federal agency. It is important to check with the NCUA to see if coverage is offered, especially as members tend to take advantages of other credit union services, such as savings accounts and insurance.
Advantages and Disadvantages of Credit Union Cards
The more favorable terms could mean that it is possible to avoid or reduce debt in a fraction of the time. However, they perform an action referred to as cross-collateralization. This means that all of the different services are linked together. In the event of the borrower defaulting on a credit union credit card agreement, other credit union services, such as a car loan, will be affected.
Sources
Willis, Gerri. (30 December, 2009). "Credit unions duke it out with banks." CNN Money.
"Credit card statistics, industry facts, debt statistics." CreditCards.com.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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