If you’ve never really looked into it, you may assume that a credit union is just another financial institution out to charge you fees and high interest. However a credit union actually differs significantly from a bank because they:
· Do not have shareholders demanding high returns, so their profits go back into maintaining low fees and low interest charges.
· Offer consistently better service, according to the October 2009 Roy Morgan banking survey which found 85.9% of credit union customers were satisfied, compared to just 72% of customers from the Big Four Banks.
· Are regulated by independent government bodies ASIC and APRA in the same way as the banks to ensure the security of your savings and the integrity of your service.
Credit Union Credit Cards
When you are comparing the best credit card for your needs, don’t forget to compare the features and benefits of the cards offered by credit unions, especially since there are more credit unions operating in Australia than there are banks.
Advantages of credit union credit cards:
· You are in control as a member of the credit union. When you apply for a credit union credit card you are applying to be a member, not a customer and as a result you will be able to vote on the governance of your credit union, and enjoy rewards from the profits being returned to the running of the financial institution, rather than to the shareholders.
· Better customer service. A credit union knows it has to offer an important point of difference from the banks and in addition to keeping fees and credit card charges lower, credit unions also excel in customer service. Therefore, instead of dealing with an Australian subsidiary of an American bank, and being put through to an American call centre, you are dealing with a local financial institution, and with staff who are members themselves.
· More chance to negotiate your circumstances. If your credit card application is rejected, you have more opportunity to negotiate with the credit union to find a solution which will allow you to manage a credit card account. Similarly, if you run into financial trouble, you can more easily negotiate a lower interest rate, reduced fees or a payment plan.
Disadvantages of a credit union credit card:
· A smaller product range. Since a credit union focuses on keeping their products affordable, they do not usually offer such an extensive range as you will find with a bank. However, rather than shopping around for the best credit card within one institution, you may have to compare the products of several credit unions to find one which suits you.
· Fewer rewards. You are less likely to find a credit union credit card with a rewards program as their profits go back into more affordable products, rather than rewards schemes.
· Shorter hours of operation. Banks tend to have more flexible hours of operation, open longer during the week and on the weekends.
Bank Credit Cards
Banks have bigger advertising budgets and therefore more money to spend on making sure that you know about their products, so make sure that you know about all the advantages and disadvantages to a bank credit card before you make your decision.
Advantages of a bank credit card:
· You can buy shares in your bank. As such, you can have an investment in the success of your financial institution and protect your interests, while also receiving dividends from the bank, and in turn getting back some of those fees and interest charges you may have paid.
· Your financial products remain independent of each other. A credit union will apply a practice called cross-collateralisation where your products will be tied to each other. Therefore, if you take out a personal car loan, the car becomes collateral if you default on your credit card; this means your car could be repossessed to pay off your credit card debt with a credit union, but banks do not use this practice.
· Your credit card application is based on your financial situation not your financial education. Part of the credit union credit card application process could be that you are forced to take financial lessons to make sure you know how to manage your finances before your application is approved.
Disadvantages of a bank credit card:
· You are more likely to incur a balance transfer fee. When you take advantage of a balance transfer offer of a lower interest rate on a balance from another credit card, a bank is more likely to charge you a fee to make that transfer compared to a credit union. That fee is usually a percentage of the balance you are transferring.
· Higher rates and fees across the board. When you compare the fees and the interest rates charged on bank credit card accounts, they will be higher than those on a credit union credit card, so decide whether you are happy with any extra features which come with a bank credit card.
· Less satisfying customer service. Where 85.9% of credit union customers are satisfied with the service they receive, only 72% of banking customers could say the same. Therefore, before you apply for a bank credit card, take their call centre for a test drive to see how long you wait on hold, how helpful the staff are and how easy the entire experience is.
Choosing a credit card is as much about the provider as it is about the features because you need to be happy with both the service and the products, with the rewards and the fees. Therefore, consider your needs carefully to determine which are the most important aspects of a credit card for your situation, before you decide between a credit union or bank credit card.