Should You Decide To Utalize Large Bank Charge Cards Above Credit Union Chargecards

December 23, 2009

By system

Have you been researching the credit card news lately? A lot of things are getting ugly out there for credit card holders and financial institutions alike. If you have a credit card in the bottom of your pocket, you’ve probably watched your interest rates blow up and your credit line fall. This is true even if you’ve made all of your payments on time and never maxed out your credit limit. On the other side of the coin, credit card companies have posted record losses, and some major retailers have even had to give up on their unprofitable credit card endeavors.

What does all of this mean for the average Joe? Two things are certain: Real credit card reform won’t come along until mid-2010, and while you wait, you’d better make your credit card payments on time, every month, or risk going into default.

It probably seems a bit draconian to send a card holder into default if they’re only a few days or even minutes late making their payment, but credit card companies have the right to do this – at least for now. And sky-high default interest rates will keep you from making any headway on your card outstanding balance. If you find yourself in default, what can you do?

Take your business to a credit union. They work under a different (some would say more consumer-friendly) set of rules. Here are a few of the differences between a credit union credit card and a regular large financial institution-issued card.

The Availability of Credit

The rules of lending are harsher than ever, thanks to the current recession. Understandably, banks have become more picky about people they’ll hand out credit to. By contrast, many credit unions are willing to issue credit cards to members with low credit scores.

The Interest Rates

Credit cards from federally chartered credit unions mostly have lower base interest rates than cards issued by large lenders. They’re also limited to a maximum interest rate usually about 16-18%, even if your account goes into default.

The Reasonable Rules of Default

Unfortunately, some credit card issuers have been known to place charge card holders’ accounts into default status after one missed payment. Even if the lost payment was only one or two days late. Credit unions seem more willing to work with their members. Many credit unions will overlook a few late payments before taking any action. Always check with your bank or credit union to learn their policy on default.

In today’s economy, we need all the help we can get. It doesn’t help card holders to be slapped with 29% interest when they’re having trouble making a payment in the first place. If your bank has raised your rates one too many times, take your business to a more forgiving credit union.

However if you still want a creditcard from a major financial institution, I would recommend Discover card. A good amount of the rules at Discover card are about the same as credit unions.

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