Understanding Credit Union Credit Cards

When looking for a credit card, you need to review all available card options. That means even considering  a credit union credit card opposed to a major card issuer. However, before deciding on your lender, you should understand the difference.

What is the Difference Between a Credit Union Credit Card and a Major Issuer Credit Card?

When you think about where to get a credit card, you probably think of a typical bank. If so, you’re not alone. However, more often financially savvy individuals are turning to credit unions for their credit card needs. Unlike traditional banks, credit unions are nonprofit so their actions, typically, benefit their members as opposed to regular banks who make decisions based on their stockholders and share price.

Usually you will see credit union credit cards with a lower interest rate, lower fees, etc. This is an example of how credit union credit cards are a bit more friendly towards the consumer. All credit unions are different so rates can vary. For example, you can usually see a limit of 18% on interest rates for loans. Banks, on the other hand, typically base their interest rates on the competition and the market.

Regardless, the best way to avoid interest rate is to pay your balance off in full every month. If you can’t do that, then these are some rates that you may need to be aware of.

Advantages of Credit Union Credit Cards

Just like anything in life, there are advantages and disadvantages to credit unions. There are many advantages to a credit union credit card. It is important to note that these advantages may not be applicable for every credit union. You want to check out the specifics of your credit union when you compare your options.

Your Rates and Fees

Due to the fact that these financial institutions are member-owned, they provide benefits to its members. These benefits can include better interest rates, and lower fees.

Good Community Involvement 

Every credit union is different. However, oftentimes these financial institutions are important players in local economics. Credit unions can offer financial literacy opportunities and small business support. Sometimes, they can even contribute to other aspects of the community through charities.

More Helpful Customer Service

Credit unions can offer some more involved customer service depending on the institution. If you are looking for an option that can be better for the customer, you may be able to find that perk here.

Disadvantages of Credit Union Credit Cards

It is important to be aware of all aspects of the credit card you are looking to get. Your lender has disadvantages as well  that you should learn about before making a decision.

Credit Unions May be Difficult to Get Into Not Open to the General Public

Typically, people of the public can’t submit an application for a credit union card if they are not an existing member. You must have an exclusive membership to the credit union. You can usually obtain these memberships if you are associated with specified groups and/or employers.

Since credit unions are nonprofit, the credit cards aren’t offered for any profit. Rather, credit union credit cards indirectly affect credit union members. If a credit union is able to make money, it is then able to offer better benefits to members. Benefits can be reduced feeds, better interest rates, and more.

Approval May be Difficult

Even if you are a credit union member, you may not be eligible for a credit card. You will still have to go through a typical credit check. This will also include an income review that will determine eligibility. Luckily, credit unions can be a bit more flexible with approval conditions for a credit card. You may even have the opportunity at a second chance if your application is denied. Major card issuers may not be so lenient.

You Can Impact Your Other Accounts

Any credit union account you have is connected to all of your other accounts. This means if one account falls short, your other accounts may be considered for collateral. For example, you could have a checking account and a credit card account at a credit union. If you end up severely delinquent on your credit card payments, you checking account funds may be in jeopardy.


Other than these disadvantages, credit cards issued by credit unions act pretty similar to credit cards issued by major lenders. They have capabilities like balance transfers, cash advances, purchases, pending on your lender. A majority of credit unions will report your credit to a major bureau, so it is important that your account is in good standing.

How Do You Affect Your Credit Score?

You will still need to build credit, regardless of your issuer. That is why it is important to understand the different aspects that go into that score. There are multiple factors that go into that score. However, some of the most impactful aspects are:

  • Payment History: This is the most important aspect when it comes to determining a credit score. This will account for 35% of your score. You want to make sure you repay your debt on time, every due date. This will show lenders that you are reliable and responsible with your debt. Even one missed payment can affect your score.
  • Credit Utilization: Most people think that it is best to pay off your credit card completely, every month. However, that may not be the case. Even though paying off your credit card debt may be able to help with interest fees, there are other repayment options to consider. Financial experts agree that keeping your credit card usage no more than 30%. This aspect impacts around 30% of your score.
  • Credit History: The length of time that you have had your credit is important. It makes up 15% of your score. The age of your oldest account, your newest account, and the average age of all of your accounts will be taken into consideration. A good rule of thumb is the older your credit history, the better your credit score.
  • Credit Diversity: It is important to have a nice variety of different credit accounts in your portfolio. If you can show that you can maintain multiple different account types, you improve your ability to show credit trustworthiness. You can showcase your ability to manage a variety of credit accounts. This accounts for about 10% of your credit score.
  • Newest Credit Account: The length of your credit plays an important aspect. New accounts opened impacts your score as well as the hard inquiries that go along with that. This makes up about 10% of your score.

Understanding Inquiries on Your Credit Report

When you initiate a credit check, you could be submitting a hard inquiry. However, it can get confusing when you are learning the difference between hard and soft inquiries. Luckily, it may not be as hard to understand as you think!

Soft Inquiries

This is a type of inquiry that will not impact your credit score at all. These are typically associated with pre-approvals. It provides lenders the opportunity a quick peak at your score to determine eligibility. Soft inquiries are also common in order to send you offers in the mail, employer background checks, and some personal credit checks. For the most part, you can still see soft inquiries on your credit report, even though they do not impact your score.

Hard Inquiries

This inquiry, on the other hand, is a bit different. These are typically only done when you need to check your credit when borrowing. This can be for a credit card, a mortgage, a loan, and more. These inquiries are on your credit report for roughly two years. Lenders perform these inquiries in order to gauge your credit trustworthiness. The newer the hard inquiry, the more impact on your score. However, as time passes, it will impact your score less and less until it eventually falls off. If you try to “shotgun” your credit and confirm  multiple hard inquiries on the account, you can be considered a high-risk consumer. This can negatively impact your score.

How to Prepare for an Inquiry

It can be nerve-wracking to deal with inquiries. The stress of impacting your credit score can take a toll on your mental health. That is why you should take steps to prepare for your inquiry in order to feel more confident in your financial decisions.

Before you even submit an application for a loan, talk to your lender. Ask about the  type of inquiry and see if there are any pre-approval options. Your lender may be able to submit a soft inquiry before pulling a hard one. This could save you a denied hard inquiry on your report.

You can also consider other aspects of hard inquiries. Even though submitting multiple inquiries at the same time can affect your credit, that may not always be the case. Sometimes, rating agencies can consider multiple hard inquiries as “rate shopping.” If they deem these to be rate shopping, then they will have the impact of one hard inquiry, opposed to multiple.

Regardless, err on the side of caution. You want to make sure you don’t overload your account with inquiries. Plus, you don’t want too many new accounts either. When you know that you will be submitting hard inquiries, plan ahead. Once you submit the inquiries, make sure it is accurately reflected on your credit report.

Getting Into a Credit Union

It can be intimidating to open a credit union account. This is mainly due to the fact that it is through a different financial institution. Terms like membership can cause some confusion as to what actually entails a credit union account. Fortunately, it isn’t as difficult as you may think/

Step #1: Check Out Your Qualifications

If you want to join a credit union, you must have some relation to a credit union membership. Some qualifying dynamics are:

  • You gain membership through your employer. If the credit union and your employer have a relationship, the employees may be able to join.
  • Community opportunity. If your credit union is community-based, then you may be in luck. If you are a part of a specific community, you could have the chance to join.
  • Family member perks. Someone in your family may already be a member. If that’s the case, they may be able to let you in since you are their friend/family member.
  • Step #2: Get Your Deposit Together

Once you qualify for a credit union, you can open your account. Typically you can do this in-person or online. It is important to remember that credit unions are nonprofit. That means that a deposit that represents your share purchase in the credit union must be provided. Credit unions vary by area so their deposit requirements may be different.

  • Step #3: Account Setup

Now that you are a full-fledged member, it is time to utilize the services that your credit union offers. These can include many similar services to a bank like direct deposit, inline bill pay, app perks, system alerts and more.

How to Choose a Credit Union

There are countless options when it comes to choosing a credit union. You want to find a union that is best tailored to your needs. That is why when considering your options, you want to look at the products, rates, and services that they provide.

It is important to compare credit unions as well. However, when doing so, make sure to look  at important aspects. You should be looking at different interest rates opposed to branch hours. These are typically up to date with technology so a lot of services can be done virtually.

When looking for credit unions, try to find one that is federally insured. This can provide you a safe option when it comes to credit unions. However, there are unions that are not federally insured. If that is the case, you need to take extra steps to make sure you understand your protections.