Still reeling from the credit card rate hikes over the past year, many consumers have pulled back on credit card spending and instead turned to debit cards or good, old-fashioned cash. However, if you regularly carry a balance on your credit card, looking around for a low interest credit card can save you bundle in today’s world of inflated credit card interest rates.
In case you wonder if low interest credit cards are a thing of the past, here is some good news: there are still many great low interest credit card offers out there; however, you have to look longer and harder for them. While credit card interest rates for most large card issuers are no longer competitive, there are still great rates to be found in smaller banks, like Simmons First, which specialize in low interest credit cards.
By far the most low interest credit card offers, however, are to be found among credit cards issued by credit unions. The 12 largest credit unions feature median advertised interest rates at about 20 percent less than the rates for bank credit cards, according to a study done in July by Pew Charitable Trusts. Since interest rates on bank credit cards have continued their upward climb since then, the difference is even greater now. In a current list of low interest credit union cards compiled by Bankrate.com, the advertised rate for credit union cards range from 8.5 to 11.20 percent, compared to 11.99 to 16.24 percent for bank-issued rewards credit cards or 0% APR balance transfer cards.
The late and over-the-limit fees for credit union cards are also lower, typically at $20 compared to $39 for banks. The default penalty rates on credit union cards is significantly lower as well, at a median of 17.9 percent according to the Pew Charitable Trusts study. Compare this to a median 28.99 percent default rate for bank issued credit cards, with some cards charging well above 30 percent.
Credit unions can offer more reasonable interest rates and fees because they are nonprofit member-owned cooperatives. Credit unions don’t have to generate profit for external shareholders, instead they are charged with providing reasonably priced financial services to their members. Nearly 90 million people in the U.S. currently belong to a credit union.
The main disadvantage of credit unions is that you have to be a member in order to benefit from their services, including the credit cards issued by the organization. Since credit unions are targeted at specific member groups, not everyone qualifies for membership. In addition, don’t expect to start out with a high credit limit. For most credit cards issued by credit cards, your credit limit will increase over time as you build a personal relationship and a track record with the organization.
Fortunately, there are more resources available than ever before to find a credit union that’s a match for you. Here are a few places to look for a potential credit union to join.
FindACreditUnion.com
Sponsored by a subsidiary of the California Credit Union League, this website offers one of the most comprehensive compilations of credit unions on the web. The website lets you search for a credit union by geographic area, by ethnic background, religions affiliation, or by an organization or association you belong to. The results contain links to the website of each credit union listed, so you can click through to get more details and apply for membership. The site doesn’t yet include all states, however, so if your state is not included, use one of the other alternatives listed below.
Bankrate.com
This convenient comparison tool from Bankrate.com allows you to compare credit unions rates for many different financial services, including mortgages, home equity loans, personal loans, and credit card rates.
Yellow Pages
Many credit unions serve members by geographic area, so finding a credit union that would accept you as a member could be as simple as looking in the Yellow Pages, either online or in your phone book. It is useful to first check out the credit card interest rates offered by credit unions listed on one or both of the websites above, so you have a basis for comparing if your local credit unions are competitive.
