5 Ways Credit Union Credit Cards Can Beat Flashy Bank Offers

Credit cards at credit unions may keep pace with other offers or they may provide value in the form of lower fees and interest rates.
Melissa Lambarena
By Melissa Lambarena 
Edited by Erica Corbin

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

When you’re frequently bombarded with ads for credit cards at big banks, it’s easy to overlook credit cards at a local credit union. These not-for-profit organizations typically require membership based on location or affiliation with an employer, a family member or an organization. Major credit card issuers generally don’t have these requirements.

But while the rewards and perks are often flashier on bank-issued credit cards, credit union credit cards may offer generous incentives of their own or other forms of value. Plus, a credit union provides many of the same services that banks do, but the profits are returned to members in the form of reduced fees, lower interest rates and more.

Here are some ways in which credit union credit cards can eclipse glitzy offers from banks.

Lower fees

It’s not uncommon to find credit cards at a credit union with lower annual fees, balance transfer fees, cash advance fees, late fees and so forth. In fact, the average late fee is about $10 cheaper at a credit union than at a bank, according to a Membership Benefits report by the Credit Union National Association. The types of fees assessed vary by credit union.

Navy Federal Credit Union in Virginia, for instance, has a military focus and fees to match members’ lifestyles.

“We know that many of our military members are stationed abroad so having no foreign transaction fees on any of our credit cards, we think, is a really fantastic way that we are able to serve our community,” says Justin Zeidman, head of credit card products at the credit union.

Fees are an important factor to consider when choosing a credit card at any institution.

Lower interest rates

If you carry a balance on a credit card over a long period, you can potentially save more money on interest with a credit card from a credit union than one from a bank. That’s because, unlike at banks, interest rates at federally chartered credit unions are capped. Federal law caps the interest rate on loans and credit cards at 15%. However, the National Credit Union Administration Board temporarily raised it to 18% and recently voted to maintain this rate through March 10, 2023.

As of March 2021, the national average interest rate for a credit card from a credit union is 10.97% compared with 12.55% at banks, according to the NCUA.

Potentially healthy rewards

Some credit union credit cards compete with the sign-up bonuses or ongoing rewards rates found at big banks. It’s one of the ways these not-for-profit institutions return value to members.

For Keenan Kimbrough, a 27-year-old resident of Pennsylvania, the rewards and low-interest rates were worth making the switch from a bank-issued credit card to a credit union card. His credit union card gets a lower interest rate of 12% compared with the 22% of the old card and the credit union card earns elevated rewards in common spending categories.

When redeeming rewards, “I can get $40 or $50” in cash back, Kimbrough says. “It was a good move.”

More flexible options to access credit

When you have less-than-ideal credit and don’t have enough money for a security deposit on a secured credit card, a credit union may provide alternatives to build credit. For instance, USAlliance Financial, a credit union based in New York, is one of many credit unions that offers a credit builder loan as an alternative for members who can’t pay a minimum deposit upfront to qualify for a secured credit card.

“Over half, around 53%, of members are at credit unions that offer credit builder loans that help people establish credit,” says Jordan van Rijn, senior economist for the Credit Union National Association.

With this type of loan, the amount borrowed is held in a bank account while you make small incremental payments over the term of the loan. At USAlliance Financial, the lowest payment with a credit builder loan can be around $42 a month compared with a minimum upfront cost of $250 for a secured credit card. At the end of the loan, the funds are returned to you and can be applied toward a secured credit card deposit to continue establishing credit.

Access to resources

Credit unions typically provide members access to resources when it comes to managing a credit card or spending.

“Financial education and financial literacy programs are extremely common at credit unions, that’s a big part of what they do,” van Rijn says. “We have data showing that 83% of credit union members are at credit unions that offer financial education classes.”

Resources are available in the form of online educational tools, seminars or partnerships with organizations that provide credit counseling or financial planning services. Offerings vary by credit union.

This article was written by NerdWallet and was originally published by The Associated Press.

Find the right credit card for you.

Whether you want to pay less interest or earn more rewards, the right card's out there. Just answer a few questions and we'll narrow the search for you.

Get Started
Get more smart money moves – straight to your inbox
Sign up and we’ll send you Nerdy articles about the money topics that matter most to you along with other ways to help you get more from your money.