In the first part of this series on store credit cards, we saw why chain executives want you to apply for them. By having a store credit card, you develop loyalty to the chain. You’ll also buy more “stuff” from the chain’s stores because you’ll pay for the merchandise with credit instead of cash.
In the second part, we saw that applying for and using a store credit card — or any other kind of credit card — can lower your credit score. The high interest rates on store credit cards also can drain you financially.
In this post, I’m going to talk about what I personally think is the best kind of credit card to have: a credit union credit card. I’ve had one for over thirty years, and it’s the only one I have. A report on the best and worst credit cards in a 2007 issue of Consumer Reports shows why. The article says that APRs for credit union credit cards were lower than APRs for bank-issued credit cards (9-11% vs. 17%). The article also quotes George Overstreet, who teaches finance at the University of Virginia, as saying why credit unions offer better deals on credit cards than bank credit cards (or store credit cards):
Credit unions are run by members, so they have a vested interest in providing credit at very low rates. And they are more focused on keeping their members happy, while banks have to worry more about keeping their investors happy.
Currently, the APR on my card is 10.90% (although I always pay the full balance at the end of the month).
Credit Unions also give loans with lower interest rates than banks. I remember in the 1990s, when I was buying a new Honda, the salesman tried to get me to finance the loan through him. He thought Honda financing had low interest rates. So he asked me how much interest I’d be paying for my loan through my credit union. When I told him, he said in surprise, “I can’t touch that!”
Many credit union credit cards also are competitive in offering rewards, just like bank cards and store cards. My own card pays me a percentage of what I spend on it annually. This perk doesn’t change my spending patterns, but I do like to see the money suddenly show up in my credit union savings account at the end of each year.
Another nice thing about credit union credit cards — and loans you get through the credit union — is what happens when you get hit by tough times. Unlike banks or loan companies, the staff at your credit union will work with you develop a plan to pay off the debt. After all, you’re not just a customer, but a member as well.
One final note: Congress has passed legislation that will change some of the practices of credit card companies. Already some companies have raised the interest rates on their cards, and doing other things, to head off the legislation. But the credit unions aren’t. The new policies that are being forced on the for-profit banks and credit card companies are policies that credit unions have been following for years.
Do any of you have credit union credit cards? If so, what do you think about them?
See also:
Tags: credit union credit card, store credit card, store credit cards
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in this times of economic recession, sometimes it is difficult to have a great credit score”.,