NEW YORK -- You're fed up with your bank's credit card fees and terms. Would switching to a credit union bring any relief?
Many don't realize that credit unions are nonprofits owned by their members. The result is that they tend to offer more favorable terms. Also, the interest rates they can charge are capped by regulators. Anyone considering a switch should expect some significant trade-offs and limitations, however.
Here are key questions and answers worth knowing.
How would I even begin to get a credit card from a credit union?
The first step is finding a credit union you can join. Each of the country's 8,000 or so credit unions cater to a specific group, such as a company, university or geographic region.
Chances are you're eligible to join at least one, but it may not have the services you want. For example, only about half of credit unions offer credit cards. So if that's your main reason for joining, make sure the credit union you're considering offers a card with terms you like.
Will the service and rewards be comparable to a bank-issued credit card?
Most credit cards offered by credit unions don't come with rewards programs. If you're considering a credit card from a credit union, however, chances are that your main concerns are fees and rates.
As for customer service, you may find it more personal at credit unions since they tend to be smaller. But that could also mean the hours of operation are limited.
How much lower can I expect interest rates to be at a credit union?
Federally chartered credit unions, which make up about 60 percent of the industry, can't charge more than 15 percent. But that limit can be raised under certain conditions. For instance, the cap is 18 percent right now because of the economic climate. The remainder of credit unions abide by rate caps set by the states they're chartered in.
Median interest rates on cards from credit unions were 9.9 percent to 13.8 percent last summer, according to a study by The Pew Charitable Trusts. At banks, they were 12.2 percent to 17.9 percent.
How do other rates and fees compare?
Rates and fees across the board tend to be cheaper at credit unions.
The median late and over-the-limit fees with bank-issued credit cards was $39, for example, compared with $20 for credit union cards. Most banks also charge balance transfer fees, while only a quarter of credit union cards do so, according to the Pew study.
The median interest rate banks charged for a cash advance was 20.2 percent to 21.2 percent. At credit unions, it was 10.2 percent to 13.8 percent.
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