While the nation’s largest credit card issuers have drastically increased the value and number of offers they send to consumers in recent months, experts say that issuers could soon have some serious competition.
Federal credit unions could be stepping up their game against major credit card lenders in the U.S., as they’re able to offer lines of credit with more beneficial terms to consumers, according to a report from Business Insider. The interest rates—for both loans and credit cards—these institutions extend to borrowers is capped by federal law at just 18 percent. By contrast, while many of the nation’s top card issuers are expanding lending efforts to borrowers with lower credit scores once again, many of these cards now carry interest rates as high as 25 percent.
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“Recent data shows that the average rate for a classic credit card at a credit union averaged less than 12 percent with many rates as low as 9 percent,” Fred Becker, Jr., president and chief executive officer of the National Association of Federal Credit Unions, told the site.
Consumers can generally also expect to receive higher-quality customer service from credit unions because, by their nature, the smaller institutions are designed to serve a community, the report said. This is why, for example, they are also far less likely to apply annual fees to credit card accounts.
[Free Resource: Check your credit for free before applying for a credit card]
Recent studies suggest those with low credit ratings or limited credit histories can find significantly cheaper credit from credit unions, the report said. Student credit cards offered by credit unions carry late fees that run an average of $10 lower than those from major lenders, as well as 20 percent lower minimum interest rates and 14 percent lower maximums. Similarly, secured cards from credit unions offer 60 percent lower fees and 40 percent lower interest rates.
In addition, as a means of better competing with top lenders, many credit unions are also now offering credit cards that come with rewards programs, the report said.
Consumers who examine a number of offers for new accounts will put themselves in a better position to find the best available account. Check out www.asmarterchoice.org to find a credit union near you.
[Credit Cards: Research and compare rewards credit cards at Credit.com]
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