The Credit Union, Credit Card Difference

College students and teens are the number one target for credit card companies. Rightly so, since they represent a large part of the consumer market eager to build credit (or just consume), while many parents are willing to bail them out of a jam. Studies have found that over 80% of graduating college seniors have credit card debt before they even land their first job, with one in four leaving college having more than $5,000 in debt and one in 10 with over $10,000 in debt.¹ It can be a high-risk business for card issuers, and it would be wise as a credit union to pay particular attention to your credit card management policies and programs, especially when it involves younger members.

One of the key reasons credit unions are so successful in today's lending landscape is trust. Members are loyal because they believe in your credit union and trust you with their accounts. A credit card, handled responsibly and timely paid off, is a great way to establish a positive credit history, track spending, access credit scores and even lower cell phone bills. The real benefit to younger members though is providing them with better interest rates on purchases and the education that credit unions provide through their credit card programs.

Education is key when it comes to informing younger members about your credit card products. Here is what every 18+ year old should know about credit union, credit cards:

Lower interest rates - median advertised interest rates on credit union cards are about 20% lower than bank cards according to Pew Charitable Trusts.
Lower fees - credit union cards imposed a median penalty APR of 17.9 percent, while bank cards charged 28.99 percent, according to the Pew Safe Credit Cards Project. Half of the credit union cards surveyed didn't even charge penalty interest rates, and over half of those that did imposed it only when the account was 60 days past due, which meets the CARD Act restriction on retroactive rate hikes. Only 10 percent of bank cards didn't charge a penalty rate. The median late over-limit fee is $20 at credit unions and $39 at banks.
Balance transfers - The Pew study found that only 25 percent of credit union cards charge a fee to transfer a balance from another card, compared with 88 percent of bank cards surveyed. The median balance transfer fee on credit union cards was 2.5 percent, compared with 3 percent on bank-issued cards. All of the credit union cards that charged a balance transfer fee also set a maximum fee, while only 13 percent of bank cards that charged a fee also capped it. The median cap for credit union cards was $50 and $75 on bank cards.
Bottom line - "Credit unions are offering lower upfront rates, with lower fees and less risk of unfair or deceptive practices," says Nick Bourke, manager of the Pew Safe Credit Cards Project.

Credit cards can be a powerful tool for young people starting out, and using this tool will allow your credit union to build the trust it deserves. Educate your members and community on the benefits your card products offer and make them aware that you are the trustworthy financial resource for them and their growing children. Look at your credit union's credit card management and find ways to offer services that can show new cardholders how to take control of their credit, such as using their mobile apps to monitor activity, set limits with remote controls for cards, rewards programs and more.