Understand the pros and cons of credit union credit cards and determine whether they are suitable for you.
If you’re looking at a credit union card and want to know whether it’s the right card for you, it pays to look at the advantages and disadvantages to understand what they’re about and how they work. As with anything in life, these cards have their positive and negative aspects, so all facets of these cards should be analysed and compared to arrive at an informed decision.
If you’re considering a credit union card it’s important to look at more than just the terms and conditions. To properly gauge a one of these products, you should consider the ethos and approach of the institution, because in addition to competitive rates, credit unions focus on a community minded approach with member benefits as a main drawcard for potential applicants.
Credit Unions Credit Card Comparison
Guide to credit union credit cards
Table of Contents
- What Are Credit Unions And Building Societies?
- What Are The Advantages Of Using A Credit Union Credit Card?
- What Are The Disadvantages Of Using A Credit Union Credit Card?
- Regulation of Credit Unions
- Point For Point: Credit Unions Vs. Banks.
- Fragments Of History.
What are credit unions and building societies?
A credit union is the same as a bank in almost every way but the main difference is that a credit union is owned by its members and it does not exist to make a profit. Although it must remain solvent to remain in operation, its main aim is to provide an enriching service to its members.
The Mutual Banks Code of Practice is the guarantee from credit unions, staff unions, building societies to always lend responsibly and to serve their customer’s needs first.
|Fair and ethical in our dealings||To deal fairly with any complaints|
|Focus on our members||To recognise members rights as owners|
|Provide clear information about products and services||To comply with legal and industry obligations|
|We will be responsible lenders||Recognising impact on the wider community|
|To deliver high customer service and standards||Support and promote the code of practice|
What are the advantages of using a credit union credit card?
- Competitive products and lower rate of interest
Canstar Cannex and Abacus figures show that the average standard credit card interest rate for mutual’s is 13.27%, 4.78% lower than the major banks.
Standard Personal Credit Cards
|Average rates, interest free days & Annual fee.||Ongoing Variable||Interest Free Days||Annual Fee ($)|
|Customer owned banking institutions||13.27%||52||51|
|Major 4 Banks||18.05%||50||57|
Credit unions and mutual societies offer credit card rates that are lower than the Big Four. This is because each mutual or credit union has their own scheme for setting the fees for their members and in most cases these fees are calculated so every member can afford to pay back every dollar borrowed.
- Customer satisfaction
According to Roy Morgan research, between 88% and 89% of mutual society, credit union and mutual bank customers are very satisfied with their service while only 79% of bank’s customers can also say the same.
- Community commitment
Every individual credit union customer is an owner of the organisation. Because they are owned by the community, these organisations are focused on giving back to the community and maintaining community standards. Examples of this include the restoration of schools, funding of community groups and connecting Australians with people overseas to help improve their quality of life. In the interest of upholding community standards, they make sure members can afford to pay back everything they borrow before lending money and have support services to help those who may be struggling financially to get back on their feet.
- Accessibility – Shop & ATM Locations
People often think credit unions and mutual societies are inaccessible and are deterred by their lack of presence when compared to the ‘Big Four’ banks. Credit unions and mutuals provide the same level of accessibility to their customers as other major lending institutions and customer’s funds can be easily accessed through online banking services as well as in person. Credit union store fronts now number close to 2000 in addition to over 3000 ATM locations nationwide.
Disadvantages of using a credit union credit card
- Cross-collateralisation (some credit unions only)
This refers to the practice of combining a credit union loan with your credit union credit card. If you take a loan with your credit union to buy a car, that car is considered collateral if you default on your credit card debt or enter into bankruptcy. Potentially, you could have your car repossessed to pay off your credit card. Banks do not secure credit card debt in this way.
- Compulsory financial education
One of the prices you may have to pay if your credit union credit card application goes to review is that you may have to undergo a compulsory lessons in managing your finances. Of course, many people will see this as a benefit rather than a drawback.
- Regulation of credit unions
Some may view credit unions with an eye of suspicion because they lack the presence of other major lenders. This is not the case as all Australian deposits held with a licensed institution are monitored by the Australian Prudential Regulation Authority (APRA). Deposits of up to $250,000 are guaranteed by the Commonwealth Government.
All Credit unions hold an Australian Financial Services Licence (AFSL) to carry out banking business, regulated by the Australian Securities Investment Commission (ASIC).
Credit unions are also subject to a range of obligations under consumer credit, privacy laws and the EFT code of conduct so when you use a credit union credit card you will be covered by the same level of fraud protection as other major credit providers.
Credit union versus banks
- Regulation of credit unions
|What is the focus?||Their main focus is on their members and on improving their financial situation as much as possible by providing industry leading products and advice.||Their main focus is on maximising their profits. banks need to pay shareholders and show that they are profitable to attract investors.|
|Where does my money go?||The money made by credit unions and mutual societies is reinvested into providing customers with better rates, fees and personalised products to provide a better experience for their customers.||Money is distributed amongst the shareholders of the organisation and invested in a variety of financial products. this is great if you hold a stake in a major bank, but that doesn’t apply to the majority of us.|
|Is my money secure?||Credit union credit cards are subject to the eft code, protecting consumers against fraudulent electronic transactions, are covered by the visa and mastercard secure payment systems and are fitted with the latest chip technology.||Banks offer the same level of protection against fraud.|
|Can i earn rewards?||There are a range of credit union rewards cards. they are linked to the same rewards schemes as the major lending institutions and offer great value per dollar spent.||Banks have a range of rewards cards from the major rewards schemes.|
|Are there any other benefits offered?||Credit union credit cards offer the same benefits as the major lenders credit cards. benefits like complimentary international travel insurance, purchase protection insurance and guaranteed pricing schemes are all included with certain products.||Banks offer a range of insurance benefits with their cards, although these products may be more expensive when compared to credit union credit cards.|
History of credit union credit cards
- 1864: the first rural credit-union in Heddesdorf in Germany was founded by Franz Hermann Schulze-Delitzsch.
- 1850’s: the first building societies were founded in Australia. (If you hover your mouse over it this paragraph pops up.
- 1870: Australia’s oldest surviving permanent building society forms in Tasmania.
- 1958: first modern-day credit card was created by the Bank of America.
- 1946: Australia’s first official Credit Union was introduced to Australia by Kevin Yates.
- 1950’s: Approximately 50 credit unions are registered in NSW.
- 1977: Queensland Teachers’ Mutual Bank installs the first 24-hour ATM at an Australian retail outlet.
- 1981: A credit union operates Australia’s first EFTPOS facility.
- 1999: Australian credit unions and building societies assume the same regulatory status as banks, reporting to the same regulator, the Australian Prudential Regulation Authority (APRA), regulated under the Federal Banking Act.
- 2006: The Credit Union Industry Association (CUIA) and Australian Association of Permanent Building Societies (AAPBS) merge to form a new, joint industry association, the Association of Building Societies and Credit Unions (Abacus).
In order to know whether a Credit Union Credit Card is right for you, you will need to compare more than just the terms and conditions of Credit Union and bank credit cards, but look at the ethos of the institution and their approach to business. Some people may enjoy how a Credit Union or Mutual works, while others may prefer to keep their credit card providers at an arm’s length.
* The credit card offers compared on this page are chosen from a range of credit cards CreditCardFinder.com.au has access to track details from and is not representative of all the products available in the market. The use of terms ‘Best’ and ‘Top’ are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.