Getting a Credit Card: Banks vs. Credit Unions

Author:     Thursday, August 28, 2014 12:00 AM

If you're looking for a credit card, you may start the process by deciding between American Express, Discover, MasterCard, or Visa. That choice is important because you want to know that your card will be accepted where you plan to shop. However, because most credit cards are issued by banks or credit unions instead of directly by the issuer, you'll also need to decide which bank or credit union to go to to get the credit card. Here are four things to consider when deciding whether to use a credit union or a bank.

Ease of Applying

Both banks and credit unions will have similar applications requesting your contact information, employer, salary, and social security number. Most will have a simple online application, but smaller credit unions may require that you go to a physical branch or become a member before applying. The real difference is in approvals for large credit lines requiring income verification — banks will generally want strict documentation, while credit unions will generally be satisfied with a history of making regular deposits with them and maintaining a balance in your checking and savings accounts.

Interest Rates

Bank credit cards generally have interest rates between 12% to 20%. Many credit union credit cards are below 10%. If you need to make a large purchase, a personal loan will likely provide a better interest rate, but credit union cards are generally the go-to choice for an emergency card you could use to pay for a sudden car repair or appliance replacement.


Many banks offer a variety of cash back, travel miles, and other rewards programs. The variety helps attract a broader range of customers to the banks. Credit union credit cards are generally targeted towards existing members and have smaller profit margins due to the lower interest rates. Most credit unions have either no rewards program or one or two simple options that don't provide the same level of rewards as bank credit cards.

Your Credit History

Credit unions are generally geographically limited, and moving will often force you to find a new bank or credit union. While you can normally keep a credit union credit card open after you move away, you should use a national bank for your credit cards if you like to be able to walk into a local branch. Closing credit card accounts and opening new ones when changing credit unions will generally lower your credit score.

Source: BFI