WTOL.com, Toledo's News Leader, News 11 | Sick of high credit cards fees – try cards from credit unions

Sick of high credit cards fees – try cards from credit unions

By Lauren Lowrey - bio | email 

Posted by Nick Dutton - email

TOLEDO, Ohio (WTOL) - Using credit cards to charge purchases has become second nature in America. But using the cards doesn’t have to come with the headaches of high rates and fees. Most folks don’t know about cards from credit unions, but they might be an option for folks tired of high fees.

"We do hear stories from members who come in and say, ‘I had this card at… and they cut my limit or they increased my rate or maybe both’ and they've come here to ask if we've got a solution for them… ," said CEO of Directions Credit Union Barry Shaner.

A recent Pew Charitable Trusts study found interest rates for credit union cards were up to 20 percent lower than bank-issued cards. And credit union penalties were generally less severe and in some cases, nonexistent.

The study looked at how financial institutions were responding to the CARD Act. The legislation, signed earlier this year and scheduled to take effect in February, will prohibit financial institutions from levying retroactive interest rate hikes on card customers' existing balances and will require that they give customers at least 21 days to send in payments. Nearly all credit card issuers currently reserve the right to increase customers' interest rates at any time. The study found that several credit unions advertised interest rates on outstanding card balances below 10%, including Boeing Employees, Navy Federal and the Pennsylvania State Employees Credit Union.

Shaner says they don't have a cash advance fee or an annual fee. “The late fee has a 10-day grace period. The over-the-limit fee almost never comes into play because we won't authorize things over the limit…”  

Many other credit unions operate the same way. Bay Area Credit Union’s basic card has been the ticket for years.

"We have had what we like to call our 'very vanilla visa card for years and years. It's a no-frills credit card. It's been very basic; it's had a fixed rate," said Bay Area Credit Union’s Val Strickland.

Credit union’s card pays off: If folk’s current card has 18 percent APR, they’d have $10,000 to pay down, and pay $250 a month and take 62 months to pay off.

By transferring the balance to a credit union and paying the same monthly payment, but with 12 percent APR, the payoff time would be 52 months.

These lower rates are possible because of the fundamental difference between banks and credit unions. Credit unions are democratically controlled and not-for-profit.

Credit unions are democratically-controlled institutions: if you have an account in one -- you own it. Members' money is lent to other people within the credit union, and at the end of the year if it made money, then members’ make money.

"Our focus is on our members and what our members need to do to take care of their financial needs,” said Shaner.

Virtually everyone can be a part of a credit union, here’s where to find more information: http://www.findacreditunion.com/

At this point, credit unions only make up one percent of the national credit card market, but membership is growing substantially since the near-collapse of the financial markets in 2008. In 2009, mortgage originations in Ohio credit unions have surged 63 percent.

At Directions Credit Union alone, they're seeing about 500 new members walk-in every month to get lower fees on everything from car loans to investments.

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