Your current credit card may not be doing you any favors – especially if it was issued by one of the major credit card companies or a large bank.
Why? Because those companies are not focused on their customers’ needs as much as they are on the bottom line.
Despite that, people sometimes express concerns about switching to a credit union credit card. It’s not uncommon for consumers to have some confusion about the differences between credit unions and banks.
There are many good reasons to switch to a credit union credit card. Here are five of them.
The first reason to switch to a credit union credit card is that at a credit union, you’re a member. Big banks that issue credit cards view their customers as commodities. Their goal is to make money.
By contrast, credit unions usually have the goal of helping their members. They are willing to work with members to help them repair poor credit or build credit.
To put it in different terms, banks and major credit card companies are for-profit enterprises. Their primary goal is to earn money for their shareholders. Credit unions are not-for-profit businesses. They are jointly owned by the members and their goal is to service their members.
Major banks and credit card companies issue terms that will enable them to earn money. As we said above, their primary goal is to earn a profit for their investors. That means that the interest rates, terms and fees for the cards they issue are designed to favor them and not you.
Credit unions take a different approach. Their terms on everything from interest rates to annual fees to overage charges tend to be lower than what the banks charge.
Keep in mind that credit unions aren’t in business to make money, but they’re not out to lose money, either. One benefit of working with Addition Financial is that we’ll tell you if a credit card isn’t right for you and steer you toward an option that’s better suited to your needs.
People who have had credit difficulties in the past or who have poor credit sometimes think they can’t qualify to join a credit union. However, the opposite can be true.
The large banks don’t make money by extending credit to people who have struggled in the past. Their credit decisions tend to be cut and dried. If your score is over a certain number, you’ll be approved; if it’s below that number, your application will be rejected.
Credit unions work differently. We understand that sometimes people run into financial difficulties through no fault of their own. Losing a job or incurring unexpected medical expenses can make it hard for people to meet their obligations.
Likewise, sometimes people get into trouble because they don’t understand how to manage their money. They don’t intend to fall behind, but they do because they lack the knowledge to budget their money.
We’re willing to work with our members to help them repair their credit now and build better credit for the future. That’s a big difference between banks and credit unions.
If you have a bank credit card and you fall behind, it’s unlikely that you’ll get any sympathy if you call them to discuss your finances. Their goal is to maximize profits, and your late payment is an obstacle to them. Compromise is a dirty word.
That’s not the case if you have a credit union credit card. At Addition Financial, for example, we always encourage our members to keep us in the loop when they’re having financial difficulties. We want to work with them to help them meet their obligations.
Another way of looking at it is that credit unions want to help their members succeed. As long as you communicate and are honest, it’s probable that they’ll work with you to help you get over financial rough patches and get back on track.
Finally, federal law is on your side if you choose a credit union credit card, especially if you can’t qualify for a low interest rate from a bank or credit card company.
The reason is that federal law caps the amount of interest credit unions can charge their members at 18% APR annually. However, there is no limit on the amount of interest that can be charged by a for-profit bank or financial institution.
Switching to a credit union credit card makes sense. A credit union’s membership requirement might seem like a drawback, but membership gives you protection that you wouldn’t have if you did business with a big bank.