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The Question Isn’t What's In Your Wallet? It's What Rate Are You Paying?

The Question Isn’t What's In Your Wallet? It's What Rate Are You Paying? By Gina Ragusa
Published January 10, 2012
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By the time mid-January hits, credit card blues begin to have a strangle-hold on many Americans.  Sobering up to the fact that holiday merrymaking may have given their plastic too much of a workout, the term, “time to pay the piper” has stinging connotations, especially to card holders paying sky-high interest rates and fees.

As megabank credit cards are smacking customers with interest rates of 20% or more, credit union credit card holders can take holiday expenses more in stride. Although some members may have boosted balances over the holidays, they won’t be paying the same high interest rates as everyone else.

Why? By law, credit unions have an 18% interest rate ceiling on credit cards. Typically most credit unions barely flirt with rates over 15% and often offer lower (or no) fees and the same level of rewards and incentive programs as big banks.

Compare and Contrast Big Players

Credit card rates and fees vary based on the card holder’s credit and program type. In many cases, cardholders can obtain a basic credit card with no annual fee, however the rate is what tells the story. Comparing early January 2012 rate information on four of the biggest players on both sides, which card type is more appealing?

Credit unions:

Banks:

  • Capital One: the bank offers a bevy of credit card programs with rates ranging from 10.9% to over 24%.
  • Chase Bank: in addition to cash back and rewards programs, Chase Bank’s lowest rate starts at 11.99% and reaches beyond 22%. 
  • Citibank: like Chase, Citibank offers similar programs and rates--11.99% to over 22%.
  • US Bank: basic credit card rates start at 9.99% and extend beyond 23%. US Bank also offers numerous rewards programs for various rates and fees. 

Consumers Already See the Light

A side by side comparison typically produces the “ah ha” revelation many new credit union members are experiencing. However, following Bank Transfer Day numerous new members have already had that moment.  Peggy Young, VP/Marketing at SECU ($2.1 billion, Baltimore MD) says that in addition to seeing a flood of new members, her credit union also experienced explosive credit card growth. “In October, we saw an increase of 22%! The uptrend continued in November, with a 9% increase over last year.”

SECU credit card rates start at 10.99% , with no annual fees--a deal that has helped it compete in a fierce market.

“Our card has a very competitive rate, and is totally transparent--what you see is what you get,” she says.  “We have no annual fee, which could save you $75 a year and no balance transfer fees.”

Young adds that SECU doesn’t tack on additional hidden fees if the member stumbles on a payment or requests a cash advance.

“We don’t do what a lot of other issuers do--with other cards, if you're late or miss a payment, we don't double your interest rate; if you get a cash advance, we don't charge a fee (other banks charge on average 3% or $10); and if you get a cash advance, we charge you the same rate as on your purchases--other banks charge double or more the interest rate on the cash advance portion.”

Plus Young says that in addition to the low rates and flexible fees, SECU offers the same robust rewards program found at any mega bank.  “We also offer ScoreCard rewards--you earn one rewards point for every dollar you spend on the card, and there are no limits on the points you can earn, and you can cash them in for travel or quality merchandise. Our cards also come with free travel accident insurance and automatic auto rental insurance. We also offer credit cards for students so that they can begin building credit.”

Ready to ditch your high interest mega bank credit card?  Find a credit union today and inquire about a balance transfer offer.

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