Your credit card is a quick and convenient way to pay for necessities and fund the things you need. Credit cards from both credit unions and banks allow you to make purchases in stores and online, but there are some key differences in the services offered by these very different financial institutions.
In this article, we answer your questions about how credit union vs. bank credit cards differ and how this affects the services and options you can expect when using the cards they provide. We’ll also summarize the pros and cons of getting your credit card from a bank or credit union. We’ll consider:
- What’s the Difference Between Credit Unions and Banks?
- How Do I Apply For a Credit Card at a Credit Union?
- Who Offers Better Rates, Credit Unions or Banks?
- Do Banks Offer Better Credit Limits Than Credit Unions?
- Do Card Fees Differ at Banks and Credit Unions?
- Do Credit Unions and Banks Offer the Same Card Rewards?
- What Happens If I Default On My Card?
- Do Credit Unions or Banks Offer Better Customer Service?
- Comparing Cards From Banks and Credit Unions
- Where Will You Get Your Next Credit Card?
If you’re thinking of applying for a new credit card, take a careful look at the offerings of both credit unions and banks, and make sure you choose a card that supports your financial goals today and into the future. Read on to learn more about why it matters where you get your card.
What’s the Difference Between Credit Unions and Banks?
Credit unions are financial cooperatives run on behalf of their members. To get a credit card or receive other financial products and services from a credit union, you need to become a member. You become a member of a credit union by opening an account and, in some cases, paying a membership fee.
In the past, you had to live in a certain area or belong to a specific profession or civic group to join a particular credit union. Today, membership requirements are much more lenient. You generally need to live, work, or attend school in a defined service area.
On the other hand, almost anyone can join a local, national, or online bank. You can do so simply by visiting a local branch or opening an account online. It does not matter where you live or work. You can then apply for a credit card.
How Do I Apply for a Credit Card at a Credit Union?
The application process is similar for banks and credit unions. You’ll need to complete a paper or online application and submit it for approval. A loan officer will then evaluate your credit score and credit reports, and details of your current income and debts. Financial institutions use these details to estimate the likelihood that you’ll repay money you charge on your credit card.
One benefit of getting a credit card through a credit union is the personal touch. The same person who helped you apply often handles applications right in the branch. This can be especially helpful if you have a lower credit score, as you’ll have a chance to explain your overall financial picture in person.
If you are denied a conventional credit card, many credit unions and some banks offer a secured credit card. To qualify for this, you pay a security deposit and may only charge up to that amount. This allows you to build your credit and earn better credit card terms in the future.
Who Offers Better Rates, Credit Unions or Banks?
First, it’s important to understand the difference between APRs and interest rates clearly. Your interest rate is the amount of interest due per charging period, as a proportion of the amount borrowed. An annual percentage rate (APR) is the interest rate for a whole year (annualized), rather than just a monthly fee/rate. Banks and credit unions both tend to talk about APRs when discussing the rates offered on credit cards.
The APR is an important detail to consider when choosing a credit card. Even if you don’t plan to carry a balance each month, being aware of the APR is important in case you do miss a payment or decide to charge a big-ticket item in the future.
What determines your APR? It’s a combination of your creditworthiness and forces in the credit card marketplace. The individual APR you will be offered can be hard to predict.
So, who offers better rates? Credit unions or banks? According to statistics maintained by the National Credit Union Administration (NCUA), credit unions consistently offer lower interest rates on credit cards than banks do!
Do Banks Offer Better Credit Limits than Credit Unions?
The amount of money you can charge on your credit card is known as your credit limit. Your current credit utilization is a major factor that affects your credit limit. If you have balances on other credit cards, loans, or charge accounts, you may not qualify for a high credit limit on a new credit card.
You’re more likely to qualify for a high credit limit when you apply for a bank credit card. Large banks will normally offer to cover more charges than the average credit union.
That said, bigger isn’t always better. In other words, a higher credit card limit isn’t necessarily best for everyone. You should carefully calculate how much credit you think you’ll need each month and review your current credit utilization ratio. These figures will help you understand how much you’ll need for your goals and lead you toward the right credit card options.
Do Card Fees Differ at Banks and Credit Unions?
Every credit card issuer charges fees to varying degrees. Common types of fees include:
- Annual fees charged for the privilege of owning the card
- Late fees when you miss the payment deadline
- Balance transfer fees associated with transfers from one credit card to another
- Foreign transaction fees if you use your card while traveling outside of the United States
Credit unions are not-for-profit cooperatives, which means earnings are returned to members through better interest rates, lower loan rates, and fewer fees. In contrast, banks operate to generate profits for shareholders, which can cause higher fees and less favorable rates for customers.
As a result, credit unions typically charge fewer and lower credit card fees than banks, although it’s important to review the charges on your card in detail when signing up.
Do Credit Unions and Banks Offer the Same Card Rewards?
Additional features and rewards are a big part of the credit card game. You can expect any card you apply for to come with at least some benefits, from sign-on bonuses and low- or no-interest introductory periods to complex cash and points-based rewards systems.
Because credit unions are typically smaller and have fewer resources than banks, they’re generally not able to offer as many features and benefits on cards. However, credit cards are issued by one of a few providers, like VISA®. These providers typically offer a wide range of valuable features on all their cards.
What Happens if I Default on my Card?
While you will be charged late fees and interest on missed card payments, if you continue to miss payments, you may be deemed to have defaulted on your credit card. Defaulting on your credit card can have harmful financial repercussions, including having your unpaid debt referred to a collections agency and reported to the credit bureaus.
And, while most banks can’t use any other assets you may own through them to cover your debts, many credit unions do practice cross-collateralization. This means that collateral from one account or loan can be used to cover your credit card debt.
For example, if you miss credit card payments but have an auto loan with the same credit union, the credit union can repossess your car. Additionally, the credit union could withdraw the payments you owe from your checking or savings account.
Do Credit Unions or Banks Offer Better Customer Service?
When you have a question about your credit card terms, charges, or payments, you need access to your credit union or bank’s customer service center. Consider the size and availability of customer service as you choose a credit card lender.
Large traditional banks serve millions of customers. To do so, most banks implement a variety of customer service tools, including call centers, complex websites, and online chat. All of these options are great, but wait times can be long, and the process can be complicated.
Credit unions, on the other hand, typically serve fewer members and are well-known for offering superior service. While credit unions may not use all the technology that large banks do, members can depend on great response times and attentive, personal communication.
Comparing Cards from Banks and Credit Unions
The following table summarizes the relative advantages and disadvantages of getting your credit card from a bank or credit union.
| Should You Get Your Credit Card from a Credit Union or a Bank? | ||
| Feature | Credit Union | Bank |
| Membership Requirements | Must become a member; typically easy and based on location or affiliation | Open to anyone |
| Interest Rates (APRs) | Generally lower rates due to not-for-profit model | Typically higher rates to drive profits |
| Fees | Lower and fewer fees overall | More and higher fees to satisfy shareholders |
| Credit Limits | May offer lower credit limits | Often offer higher credit limits |
| Rewards and Benefits | Fewer proprietary perks; still offers common issuer rewards (e.g., Visa) | More likely to offer premium rewards and bonuses |
| Application Flexibility | More personal, may be lenient with borderline credit | Standardized and automated application process |
| Default Risk (Cross-Collateralization) | May seize other assets (e.g., car, savings) if you default | Usually no access to other personal assets |
| Customer Service | Personalized, local service with fast response times | More tech options, but impersonal and potentially long wait times |
Where Will You Get Your Next Credit Card?
Choosing the right credit card provider is a personal decision—one that should reflect your financial goals and credit profile. Both credit unions and banks offer pros and cons, so it’s important to weigh your options carefully before applying. If you’re looking for lower rates, fewer fees, and a more personalized approach, a credit union could be the right fit.
See Our Credit Card Benefits & Low Rates
Here are some additional resources while you research the right option for you: