Credit union credit cards can offer a number of different benefits, mostly relating to the nature of the issuing institution. In many cases, a credit union will issue a card to a member even if his credit history is poor or nonexistent. Credit union credit cards also tend to offer benefits such as lower interest rates on balances and less damaging results if a payment is missed. Most of these credit cards are also offered without a yearly fee, which is another potential benefit. Credit unions exist to serve their members, so most of the variable options associated with credit cards will tend to be favorable.
Banks are financial institutions that exist to make money for their shareholders. This is mainly accomplished through the wise investment of deposited funds, though that does not always satisfy the bottom line. Interest rates and fees are typically adjusted so that the bank can make as large a profit as possible while still remaining competitive. Credit unions are very similar institutions, though they are actually owned by their members. Rather than making a profit, the purpose of a credit union is to provide its members with good rates and low fees.
Due to the nature of credit unions, the credit cards that they issue tend to have favorable conditions for members. Many cards have high interest rates on balances, yearly membership fees, and punitive rate increases each time a payment gets missed. Credit union credit cards tend to avoid many of these unattractive features that are designed to make money for the issuing bank. Interest rates are still charged, though they tend to be favorable to the member instead of the financial institution. There are typically some form of penalties for nonpayment as well, but the member may be allowed more leeway in settling accounts.
Even though credit union credit cards come with all of these benefits, there are some potential drawbacks. Most credit unions have restrictions on who can join, so each member typically needs to be employed by a specific company or have a relative that is. It can also sometimes be difficult to withdraw money from an automated teller machine (ATM) using credit union credit cards, since they tend to have far fewer agreements with service providers than commercial banks. In some cases, the only way to use one of these cards to withdraw money from an ATM is to find a machine that is owned and operated by that specific credit union.