The Advantage of Credit Union Credit Cards Credit Cards

The Advantage of Credit Union Credit Cards

3 Sep, 2010 Credit Cards Credit Credit Cards

The turbulent global economy is leading to a trend of rising interest rates and lower credit limits, which is bad for cardholders and in some cases good for credit card companies. Even cardholders who have made all of their credit card repayments on time and in full have experienced raised interest rates in the past two years. However, there are many credit card companies that have been taking losses as well, and many retail chains have decided to stop providing store credit cards.

The Dangers of Universal Default

This economic uncertainty has led many banks and credit card companies to participate in the universal default policy, which makes it very easy for every credit card company to raise interest rates after a single late payment or payment default. In other words, even if only one late payment is made on a single credit card, every credit card issuer has the right to instantly raise the interest rates on all of that cardholder’s credit cards or bank accounts, and change any contract terms due to the cardholder’s irresponsibility.

While it may seem unfair for a single late payment on one card to cause a universal default in which all credit card companies can raise interest rates on a single person simultaneously, it can and does happen, to thousands of people every day. After the universal default has occurred, the default interest rates are often so high that it is very difficult to make sufficiently high repayments to ward off a true default on large balances.

Credit Union Regulations

A person’s best move, after experiencing universal loan default, is to apply for a credit union credit card. Credit unions are governed by rules that are much more “cardholder friendly”. Surprisingly, most credit unions will approve applicants with lower credit scores, which is becoming increasingly scarce amongst banks and other financial institutions.

Credit Union Credit Card Benefits

Credit unions also offer lower interest rates than banks, and the maximum allowed interest rate for a credit union credit card is 18%. On the other hand, banks have been known to unexpectedly raise interest rates to as high as 29% in the event of universal default. Credit unions are also much more lenient when it comes to placing a cardholder into default. Whereas most banks would apply universal default even after one late payment, a credit union will usually work with the cardholder, and even tolerate several late payments before taking any action.

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