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Credit Union Credit Card Rates Average 20 Percent Lower Than Banks

Credit Union Credit Card Rates Average 20 Percent Lower Than Banks by STAFF WRITER
Published November 4, 2009
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As if you needed another reason to join a credit union, a report from the Pew Charitable Trusts says that credit unions offered significantly lower advertised rates compared to bank credit cards, with penalty fees that were half the cost of comparable bank fees and fewer dangers associated with “unfair or deceptive” practices. The observed credit unions, in Pew's report, presented a distinct alternative to credit card pricing and other practices of the observed banks. In July 2009, median advertised interest rates on cards from the 12 largest credit unions were between 9.90 and 13.75 percent annually, depending on a consumer’s credit profile - approximately 20 percent lower than comparable bank rates. Meanwhile, credit union penalties were generally less severe than those of banks.
  • 99 percent of credit union cards included a late fee (median $20).
  • 89 percent of credit union cards included an over limit fee (median $20).
  • The median credit union penalty interest rate was 17.90 percent. These penalties were less likely to last indefinitely (one-third of penalties would terminate after 3 to 12 months of on-time payments) compared to those of banks.
Like bank cards, the vast majority of credit union cards included terms allowing the issuer to change any rates or terms at any time, or take other actions that the Credit CARD Act will eventually prohibit. However, compared to bank cards, credit union cards more closely complied with guidelines against “unfair or deceptive” practices that the Federal Reserve developed last year. For example, nearly half of the credit union cards included no penalty rates at all, and more than three-quarters of those that did have penalty rates would have met the Federal Reserve’s fairness rules. With banks continuing to increase fees on credit cards for any minor misstep, a lower fee credit card from your local credit union is usually the best deal for consumers.

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