For the Best Credit Card, Bank or Credit Union?

Q: How would I even begin to get a credit card from a credit union?
A: The first step is finding a credit union you can join. Each of the country's 8,000 or so credit unions cater to a specific group, such as a company, university or geographic region.
Chances are you're eligible to join at least one, but it may not have the services you want. For example, only about half of credit unions offer credit cards. So if that's your main reason for joining, make sure the credit union you're considering offers a card with terms you like.
You still have to apply for a credit card too; you don't automatically qualify just because you're a member. As with banks, your credit history is a factor in determining whether you're approved.
Q: Will the service and rewards be comparable to a bank-issued credit card?
A: Most credit cards offered by credit unions don't come with rewards programs. So if your main reason for using a credit card is to earn points, you might be better off with a bank. If you're considering a credit card from a credit union, however, chances are that your main concerns are fees and rates.
As for customer service, you may find it more personal at credit unions since they tend to be smaller. But that could also mean the hours of operation are limited.
Q: How much lower can I expect interest rates to be at a credit union?
A: Federally chartered credit unions, which make up about 60 percent of the industry, can't charge more than 15 percent. But that limit can be raised under certain conditions. For instance, the cap is 18 percent right now because of the economic climate.
The remainder of credit unions abide by rate caps set by the states they're chartered in. That's usually below 18 percent, if not less, according to the Credit Union National Association.
To get a sense of how that plays out in the marketplace, consider a recent snapshot of rates.
Median interest rates on cards from credit unions were between 9.9 percent and 13.8 percent last summer, according to a study by The Pew Charitable Trusts. At banks, they were between 12.2 percent and 17.9 percent.
Of course, rates won't always be lower at credit unions. It could be that the particular credit union you're considering doesn't offer rates as competitive as your current card. And the specific rate you're offered from either banks or credit unions can vary from the advertised rate depending on your credit profile.
Q: How do other rates and fees compare?
A: Rates and fees across the board tend to be cheaper at credit unions.
The median late and over-the-limit fees with bank-issued credit cards was $39, for example, compared to $20 for credit union cards. Most banks also charge balance transfer fees, while only a quarter of credit union cards do so, according to the Pew study.
The median interest rate banks charged for a cash advance was 20.2 percent to 21.2 percent. At credit unions, it was 10.2 percent to 13.8 percent.
Whether the lower fees and rates make it worth switching over to a credit union depends on your habits. If you regularly carry a balance, the difference in financing charges may add up quickly.
Q: What other costs should I consider?
A: You need to buy a share in the credit union to join. The typical share value is $5 to $20, according to the Credit Union National Association. Some smaller credit unions also charge a one-time joining fee. The median fee is just $1, but it could be as high as $50.