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The Pros and Cons of Credit Union Credit Cards

The Pros and Cons of Credit Union Credit Cards

*Editorial Note: This content is not provided or commissioned by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.

This article was last updated Jan 24, 2013, but some terms and conditions may have changed or are no longer available. For the most accurate and up to date information please consult the terms and conditions found on the issuer website.

Credit unions are often confused for banks because they provide the same basic services. While both institutes offer financing, accounts, credit cards, and more, there are some key differences between them that you need to keep in mind. Some people purely use local credit unions, and others prefer nationwide banks. You have to decide which one is right for you.

Since we're all about the credit cards around here, we thought we should compare bank issued credit cards with those of credit unions to see which ones work the best in the end. You can use our analysis to make the right choice for your finances. Here are the pros and cons of credit union credit cards so you can determine if they fit your lifestyle.

Pro: Great Customer Service

customer serviceQuite frankly, you aren't going to find any better customer support than what you get at a credit union – at least in terms of politeness and genuine concern. The people that work at credit unions are "home grown," if you will. They aren't jaded by hundreds of phone calls a day, and they aren't paid by the number of people they help. They treat each of their customers like family because they rely on those customers to stay in business. This is the biggest reason why people choose to work with them.

Con: Restricted Service Hours

Even though you'll get great customer service from a credit union, you have to consider when that business is open. Many large banks will have phone operators on staff 24 hours a day to handle basic issues with your account. Credit unions, on the other hand, do not have the funding or manpower to stay open that long. Some of them will have third party call centers through their credit card providers, and those places will be able to address questions about account balances, transfer fees, etc. However, they will not be able to deal with specific questions regarding your account. If you need assistance in an emergency situation, you may not be able to get it.

Pro: Low Interest Rates

low interestFor the most part, credit unions offer lower interest rates than traditional banks because they manage transactions on their own. In other words, they do not rely on several tiers of businesses and employees to process funds. They do the work and thereby cut out a lot of the costs. If you typically take a few months to pay off your credit card balances, a credit union will help you save money in the long run. If you normally pay your balance right away, this probably won't matter to you.

Con: Minimal Rewards

A few weeks ago, we published an article about why consumers use credit cards. One of the biggest reasons was because of the rewards they have to offer. We reviewed a study from the Aite Group which showed that 38% of cardholders considered themselves "active participants" in rewards programs. Unfortunately, credit unions do not offer a lot or rewards. If you are among the 38% that look for cards based on the bonuses they have to offer, you may not be able to find what you need here.

Pro: Flexible Payments

flexible paymentCredit unions are really good about working with customers during tough times to help them get back on their feet. If you are having trouble making your credit card payments, you are more likely to catch a break with a credit union because of their superior customer service. Also, you are more likely to get a second chance at a card if you have been denied in the past. As long as you can show that you are improving your situation, they will find a way to help you out.

Con: Cross Collateralization

Cross collateralization is a process that essentially ties all of your accounts together. Thus if you have a loan, a credit card, and a savings account with a credit union, all of your money will be secretly linked in the system. This means that the credit union could take money out of your savings account to pay for your past due credit card balance, if you have not paid by a certain time. They will do this without warning, often overdrafting your accounts or leaving you without money to live on. Of course, this is all written in the terms of agreement when you sign up for an account, but few people take the time to look at that.

Pro: Membership Discounts

discountIn some cases, you can get a special discount at a store or service center just for being a member of a credit union. This does not happen with every credit union, but most people are surprised to learn about their perks. For example, GM offers a credit union membership discount for people who buy new cars from one of their dealerships. Instead of paying the MSRP for the car, you will get "preferred pricing," which is supposedly what employees pay for new cars. This may not work all the time, but it just shows you some of the possibilities with credit union credit cards.

Con: Entry Requirements

This is what most consider the "catch" when it comes to working with credit unions – you have to be approved for an account. This could be as simple as donating $5 to an affiliated charity, or it could be as complicated as working in a specific sector of the job force. The National Credit Union Administration offers a great credit union locator which you can use to find options in your area. You'll have to contact them individually to see if you qualify for membership.

Pro: Shared ATMs

ATMYou can use any ATM to withdraw money from your credit union credit card, but you will have to pay a fee if it is outside of the union's network. Luckily, many credit unions will team up to form "sister branches," allowing you to access free account information at multiple locations. You can also visit these sister branches to transfer money, pay bills, check account details, and more if you do not want to use the ATM.

Con: Limited ATM Locations

Even though shared ATMs expand the number of withdrawal options for credit union cardholders, there are still a limited number of them to choose from. If you live in a small city with a low number of ATMs in general, chances are you're going to have to pay a fee to use one. You will have to contact your credit union of choice to learn more about the ATM locations you can use.

Pro: Low Membership Fees

feesSome people complain about paying money to join a credit union, but the fees are usually pretty low. They are much lower than the annual fees you would pay for certain credit cards, and they should only occur once when you sign up. After that, you don't have to worry about paying more until you create another account. To put matters into perspective, it cost me $5 to join my local credit union, but it costs me $75 per year to maintain one of my credit cards. The savings are pretty substantial.

Con: Unstable Accounts

The initial fees may be low, but they aren't always consistent. Banks are continuing to put pressure on credit unions, which is forcing them to raise their fees. Many credit unions have no federal funding, which means they rely on this customers to provide the money they need on a daily basis. These institutions could shut down at a moment's notice because of insufficient support.


Credit union credit cards are the most affordable options on the market, but they are not always easy to come by. If you have multiple accounts within the same credit union, you may lose money from one to pay for the other. With all of this in mind, the welcoming customer service that comes from credit unions may be too tempting to live without. If you want to get the best of both worlds, get a credit union credit card for your primary purchases, and then use a bank card for rewards and emergencies. No matter what the situation may be, you can find a way to make this work.

*Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

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